For Roberto Cavalli,
It's Hard to Let Go
Of One-Man Show
Designer Seeks an Investor
But Shuns Good Offers;
'Not Worthy of My Name'
By STACY MEICHTRY and CHRISTINA PASSARIELLO
December 20, 2007; Page A1
MILAN -- Roberto Cavalli has a fundamental problem with the executives he has hired to seek buyers for his fashion house.
"I find many of them a bit dry," says the 67-year-old, cigar-smoking Italian designer. "Sometimes incompetence is useful," he adds, now speaking of himself. "It helps you keep an open mind."
Mr. Cavalli single-handedly transformed a hand-painted knits business into one of the world's most famous fashion brands over the past four decades. But now, the designer's disdain for corporate culture is running up against a broader shift in Europe's fashion business. As juggernaut fashion conglomerates such as LVMH Moët Hennessy Louis Vuitton aggressively expand into new markets, the one-man shows that still make up a chunk of the Continent's fashion industry are struggling to compete.
Mr. Cavalli has been looking for an outside investor to ensure his company's survival, and he's finding it hard to let go. He recently rejected a Saudi fund's offer for a majority stake in his fashion house even though the price was far above market levels. "The offer was not worthy of my name," the designer scoffs.
Two years ago, Mr. Cavalli hired a former Calvin Klein executive to clean up the fashion house's operations. But Roberto Jorio Fili left after 13 months because Mr. Cavalli wouldn't let him make strategic decisions. Mr. Jorio Fili compares his tenure to a marriage that "was never consummated."
The executive just "wasn't at my level," retorts Mr. Cavalli. "Perhaps I demanded too much, because it's not easy to substitute Roberto Cavalli."
The house of Cavalli's finances are wobbly. Last year, Roberto Cavalli SpA posted $1.03 million in net profit on $157 million in sales. Mr. Cavalli's licensing business posted a net profit of $29.4 million on $102 million in sales.
Mr. Cavalli was also convicted of tax evasion in Italy last year for having used company funds to finance lavish personal expenses, such as building a home inside his helicopter hangar for an Albanian groundskeeper.
Within his fashion fiefdom, of course, Mr. Cavalli answers to no one.
Eva Duringer, the designer's wife and mother of three of his children, helps run the fashion house. Ms. Duringer, an Austrian who was runner-up at the 1978 Miss Universe contest Mr. Cavalli judged, says the job is "almost like caring for a fourth child." Cristiana Cavalli, his daughter from a previous marriage, is chief executive. Both women rarely disagree with Mr. Cavalli.
"I'm used to always deciding everything myself," the designer says. "It's a blessing, but also a terrible defect."
Although Mr. Cavalli is now one of fashion's most extroverted figures, his childhood was defined by alienation. His father was killed during World War II, when Roberto was two years old, leaving his mother alone to raise him and his sister.
Mr. Cavalli says the death of his father combined with the devastation of postwar Italy traumatized him so much that he developed a stutter. "I began to speak well at a very advanced age -- 15, 16, 17 years old," he recalls. "It was psychological: the trauma of war, my family and growing up on my own. I was more or less a street kid."
After attending art school in Florence, Mr. Cavalli says he began to paint and draw on knitwear, which he sold to make a living. In the 1960s, a textile manufacturer commissioned Mr. Cavalli to make thousands of sweaters, and in 1970, the designer launched his own collection of women's clothing.
As he carted leather and denim apparel emblazoned with wild animal prints into the subdued salons of Paris, Mr. Cavalli earned a reputation as a provocateur.
His business was overshadowed by fellow Italian designer Gianni Versace who made his name courting Hollywood starlets as clotheshorses for his provocative looks. It wasn't until Mr. Versace was murdered in 1997 that Mr. Cavalli's business took off.
Mr. Cavalli's business didn't have the factories to deal with the sudden surge in demand, so he forged deals with manufacturers that plastered his name on bags, bikinis and vodka and sold them around the world.
It was the beginning of a life of luxury. Mr. Cavalli renovated a 14th-century hilltop villa overlooking Florence where he began throwing parties for celebrities including model Cindy Crawford and pop singers Lenny Kravitz and Shakira.
As Mr. Cavalli basked in the limelight, the lines between his business assets and personal fortune became a little fuzzy, and the designer was put on trial in 2004 for tax evasion.
Mr. Cavalli deducted $2.6 million as company expenses between 1996 and 2000, including utility bills for his villa and the installation of a video projector in his bedroom, according to court documents.
During the trial, fashion photographers and celebrities testified that the designer's lavish lifestyle promoted his brand through photo shoots, interviews and sleepover parties. Mr. Cavalli was convicted in March 2006 but plans to appeal the sentence, according to a spokeswoman.
More trouble was brewing, however. The house of Cavalli had grown into an unwieldy mishmash of 500 employees and more than a dozen licenses. "I needed someone who could give me good advice on matters where I wasn't capable," recalls Mr. Cavalli.
In October 2005, the designer hired Mr. Jorio Fili to whip the business into shape. But big decisions were kept in the family. Mr. Jorio Fili's attempt to end licensing agreements for beachwear in order to bring production in house led to clashes with Cristiana Cavalli, who was then in charge of licensing.
Soon after Mr. Jorio Fili joined, the designer asked him to prepare a business plan for SAB Capital, a Saudi Arabian investment fund that wanted a majority stake in the fashion house.
The fund's owner Sheik Salah al-Balawi and Mr. Cavalli frequently went on yachting trips together but left business details to others. "Those were very vulgar matters that had to be done by lieutenants," says Filippo Lardera, managing partner at Sigma Corporate Finance SRL, who negotiated on behalf of Mr. Cavalli.
In early 2006, SAB offered to buy a stake in the fashion house that valued it at €450 million ($534 million). At 14 times 2005 operating profit, SAB was willing to pay a significantly higher valuation than an Italian bank forked over months later for a small stake in Prada SpA, the Milan fashion house. The designer turned it down.
Later that year, Italian private-equity fund Investitori Associati made Mr. Cavalli an offer valuing his fashion house at €550 million ($668 million). That too fell short of the designer's expectations. "He was talking billions," Mr. Lardera recalls.
Mr. Cavalli says he'd like to team up with another investor, "since I'm no longer young," but there are no more offers on the table.
So Mr. Cavalli is sticking to joint ventures. Earlier this year, he created animal-print frocks, metallic jackets and black-lace underwear for Swedish retailer Hennes & Mauritz AB. The limited collection sold out in a day.
Yet under the terms of the deal, the house of Cavalli didn't get a penny. Mr. Cavalli says "the commercial side" of his fashion house objected that a deal with the low-priced retailer would cheapen his brand. But he overruled them because H&M, which bankrolled a major ad campaign in his name, was a good platform to promote his wares with young clients.
Once the deal was signed, Mr. Cavalli invited H&M designers to his Florence villa where he grilled steaks and served wine from his vineyard.
The villa was eventually chosen as the backdrop for a TV ad campaign for the H&M collection that features Mr. Cavalli arriving fashionably late to his own soirée.
"Mr. Cavalli! Mr. Cavalli! You missed the party!" the crowd cries. His response: "How can I miss the party? I am the party."
story and image from WSJ.com
It's Hard to Let Go
Of One-Man Show
Designer Seeks an Investor
But Shuns Good Offers;
'Not Worthy of My Name'
By STACY MEICHTRY and CHRISTINA PASSARIELLO
December 20, 2007; Page A1
MILAN -- Roberto Cavalli has a fundamental problem with the executives he has hired to seek buyers for his fashion house.
"I find many of them a bit dry," says the 67-year-old, cigar-smoking Italian designer. "Sometimes incompetence is useful," he adds, now speaking of himself. "It helps you keep an open mind."
Mr. Cavalli single-handedly transformed a hand-painted knits business into one of the world's most famous fashion brands over the past four decades. But now, the designer's disdain for corporate culture is running up against a broader shift in Europe's fashion business. As juggernaut fashion conglomerates such as LVMH Moët Hennessy Louis Vuitton aggressively expand into new markets, the one-man shows that still make up a chunk of the Continent's fashion industry are struggling to compete.
Mr. Cavalli has been looking for an outside investor to ensure his company's survival, and he's finding it hard to let go. He recently rejected a Saudi fund's offer for a majority stake in his fashion house even though the price was far above market levels. "The offer was not worthy of my name," the designer scoffs.
Two years ago, Mr. Cavalli hired a former Calvin Klein executive to clean up the fashion house's operations. But Roberto Jorio Fili left after 13 months because Mr. Cavalli wouldn't let him make strategic decisions. Mr. Jorio Fili compares his tenure to a marriage that "was never consummated."
The executive just "wasn't at my level," retorts Mr. Cavalli. "Perhaps I demanded too much, because it's not easy to substitute Roberto Cavalli."
The house of Cavalli's finances are wobbly. Last year, Roberto Cavalli SpA posted $1.03 million in net profit on $157 million in sales. Mr. Cavalli's licensing business posted a net profit of $29.4 million on $102 million in sales.
Mr. Cavalli was also convicted of tax evasion in Italy last year for having used company funds to finance lavish personal expenses, such as building a home inside his helicopter hangar for an Albanian groundskeeper.
Within his fashion fiefdom, of course, Mr. Cavalli answers to no one.
Eva Duringer, the designer's wife and mother of three of his children, helps run the fashion house. Ms. Duringer, an Austrian who was runner-up at the 1978 Miss Universe contest Mr. Cavalli judged, says the job is "almost like caring for a fourth child." Cristiana Cavalli, his daughter from a previous marriage, is chief executive. Both women rarely disagree with Mr. Cavalli.
"I'm used to always deciding everything myself," the designer says. "It's a blessing, but also a terrible defect."
Although Mr. Cavalli is now one of fashion's most extroverted figures, his childhood was defined by alienation. His father was killed during World War II, when Roberto was two years old, leaving his mother alone to raise him and his sister.
Mr. Cavalli says the death of his father combined with the devastation of postwar Italy traumatized him so much that he developed a stutter. "I began to speak well at a very advanced age -- 15, 16, 17 years old," he recalls. "It was psychological: the trauma of war, my family and growing up on my own. I was more or less a street kid."
After attending art school in Florence, Mr. Cavalli says he began to paint and draw on knitwear, which he sold to make a living. In the 1960s, a textile manufacturer commissioned Mr. Cavalli to make thousands of sweaters, and in 1970, the designer launched his own collection of women's clothing.
As he carted leather and denim apparel emblazoned with wild animal prints into the subdued salons of Paris, Mr. Cavalli earned a reputation as a provocateur.
His business was overshadowed by fellow Italian designer Gianni Versace who made his name courting Hollywood starlets as clotheshorses for his provocative looks. It wasn't until Mr. Versace was murdered in 1997 that Mr. Cavalli's business took off.
Mr. Cavalli's business didn't have the factories to deal with the sudden surge in demand, so he forged deals with manufacturers that plastered his name on bags, bikinis and vodka and sold them around the world.
It was the beginning of a life of luxury. Mr. Cavalli renovated a 14th-century hilltop villa overlooking Florence where he began throwing parties for celebrities including model Cindy Crawford and pop singers Lenny Kravitz and Shakira.
As Mr. Cavalli basked in the limelight, the lines between his business assets and personal fortune became a little fuzzy, and the designer was put on trial in 2004 for tax evasion.
Mr. Cavalli deducted $2.6 million as company expenses between 1996 and 2000, including utility bills for his villa and the installation of a video projector in his bedroom, according to court documents.
During the trial, fashion photographers and celebrities testified that the designer's lavish lifestyle promoted his brand through photo shoots, interviews and sleepover parties. Mr. Cavalli was convicted in March 2006 but plans to appeal the sentence, according to a spokeswoman.
More trouble was brewing, however. The house of Cavalli had grown into an unwieldy mishmash of 500 employees and more than a dozen licenses. "I needed someone who could give me good advice on matters where I wasn't capable," recalls Mr. Cavalli.
In October 2005, the designer hired Mr. Jorio Fili to whip the business into shape. But big decisions were kept in the family. Mr. Jorio Fili's attempt to end licensing agreements for beachwear in order to bring production in house led to clashes with Cristiana Cavalli, who was then in charge of licensing.
Soon after Mr. Jorio Fili joined, the designer asked him to prepare a business plan for SAB Capital, a Saudi Arabian investment fund that wanted a majority stake in the fashion house.
The fund's owner Sheik Salah al-Balawi and Mr. Cavalli frequently went on yachting trips together but left business details to others. "Those were very vulgar matters that had to be done by lieutenants," says Filippo Lardera, managing partner at Sigma Corporate Finance SRL, who negotiated on behalf of Mr. Cavalli.
In early 2006, SAB offered to buy a stake in the fashion house that valued it at €450 million ($534 million). At 14 times 2005 operating profit, SAB was willing to pay a significantly higher valuation than an Italian bank forked over months later for a small stake in Prada SpA, the Milan fashion house. The designer turned it down.
Later that year, Italian private-equity fund Investitori Associati made Mr. Cavalli an offer valuing his fashion house at €550 million ($668 million). That too fell short of the designer's expectations. "He was talking billions," Mr. Lardera recalls.
Mr. Cavalli says he'd like to team up with another investor, "since I'm no longer young," but there are no more offers on the table.
So Mr. Cavalli is sticking to joint ventures. Earlier this year, he created animal-print frocks, metallic jackets and black-lace underwear for Swedish retailer Hennes & Mauritz AB. The limited collection sold out in a day.
Yet under the terms of the deal, the house of Cavalli didn't get a penny. Mr. Cavalli says "the commercial side" of his fashion house objected that a deal with the low-priced retailer would cheapen his brand. But he overruled them because H&M, which bankrolled a major ad campaign in his name, was a good platform to promote his wares with young clients.
Once the deal was signed, Mr. Cavalli invited H&M designers to his Florence villa where he grilled steaks and served wine from his vineyard.
The villa was eventually chosen as the backdrop for a TV ad campaign for the H&M collection that features Mr. Cavalli arriving fashionably late to his own soirée.
"Mr. Cavalli! Mr. Cavalli! You missed the party!" the crowd cries. His response: "How can I miss the party? I am the party."
story and image from WSJ.com
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