Bowing Out

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In the days leading up to his recent Gucci spring 2004 runway show, Tom Ford was distracted. Contract negotiations with Pinault-Printemps-Redoute (PPR), the French retail group that controls Gucci Group, were not going well. But that didn't stop the designer from interrupting a fitting to ask an assistant to dash over to a nearby restaurant with a Polaroid camera. Ford was meeting some journalists there, and he wanted to make sure the restaurant had the right look. When it comes to image, Ford likes to control every detail, right down to the rug.

It's perhaps not surprising then that control was the issue at the heart of the decision last week by Ford and his business partner, Domenico De Sole, to leave Gucci. It was what the duo had been fighting to maintain for the past year as they negotiated the terms of their contracts with Serge Weinberg, the low-key but firm chief executive of PPR. The pair's departure, if inevitable, was still the most cataclysmic thing to happen to the fashion world since Gianni Versace's murder in 1997. It rocked the luxury-goods business from Madison Avenue to the Place de la Bourse, where PPR shares slumped 5%. And De Sole, 59, not given to public displays, wept as he told his staff the news.

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He had reason. In just 10 years he and Ford had engineered a miraculous transformation of Gucci — from a dying label with $200 million in revenue into a flourishing, $3 billion luxury conglomerate with subsidiaries that include such brands as Yves Saint Laurent (YSL), Stella McCartney and Alexander McQueen. With his eye for louche glamour and his movie-star image, Ford, 42, redefined luxury, giving it a sexy, provocative edge. For most of the '90s it seemed as if he and De Sole could do no wrong. Ford had an unerring eye for reinterpreting what the public wanted; De Sole's managerial acumen made Gucci into a model of luxury expansion. Their departure from the scene, insiders fear, may mark the precise moment when that sizzle sputtered out of fashion.

Especially since many luxury-goods companies are now paying for overreaching in the '90s. Prada, which acquired Jil Sander and Helmut Lang back then, has been struggling with the resultant $743.6 million debt. And LVMH is reportedly looking to sell the Donna Karan company. Then there are retreating industry stars like Calvin Klein, who retired last summer, and Donatella Versace, who in an attempt to curb financial woes is closing stores and cutting budgets.

Moreover, two years filled with SARS, terrorism and war in Iraq have destabilized luxury fashion, driving the business and its creative talent down-market. Designers like Isaac Mizrahi and Todd Oldham have taken refuge — and found success — at Target. And even brands like Ralph Lauren and Calvin Klein are playing catch-up with Banana Republic and J. Crew, introducing new, inexpensive lines. As one industry insider put it, "None of the [Gucci brouhaha] matters because we'll all be wearing Target and Abercrombie & Fitch in two years."

Until recently, Gucci had seemed to operate outside that sort of climate change. It was as if things were always cool there. Much of this was due to Ford, who redefined the role of fashion designer, taking a more active role in management in addition to dictating the look of ad campaigns, store displays and even the floral arrangements in corporate offices. Equally at ease on the red carpet with show-biz royalty like Gwyneth Paltrow and Madonna and at Manhattan charity balls, Ford is known for wearing variations of just one "look" each season. Right now it's a velvet jacket with a starched white shirt. For one runway show, he reportedly hired hairdressers to cut and style the ushers' hair. De Sole is just as compulsive when it comes to management. During the negotiations, he went out of his way to explain developments to every employee, including the cleaning people in the company cafeteria.

But the fashion forefront is a very expensive place to be. The current turmoil at Gucci can probably be traced to 1999, when De Sole and Ford turned to Francois Pinault, the French billionaire who controls PPR, to help them fend off an unwanted takeover attempt by the rival French luxury group LVMH Moet Hennessy Louis Vuitton. Pinault bought $3 billion worth of newly issued Gucci stock, acquiring a 42% share in the company. After a bitter two-year battle with LVMH'S Bernard Arnault, Pinault ultimately prevailed, agreeing to buy up to 70% of Gucci on the stock market and to offer shareholders $101.50 a share for the rest in April 2004.

Why would Pinault pay that dearly for Gucci only to allow the men who made it so valuable to walk out the door? In a conference call last Tuesday, Weinberg and De Sole declined to say why they couldn't reach an "appropriate balance" in their discussions. De Sole cryptically quoted a Chinese proverb, "Same bed, different dreams."

According to sources close to Weinberg, there was no single stumbling block. Ford and De Sole were insisting on formal independence from PPR, even after it acquired 100% of the Gucci Group. Weinberg jokingly said earlier this year that he had "no intention of designing dresses." But he had been pressuring Ford to relinquish the design director job at the YSL label, which has not been selling well.