Gucci Group N.V
YSL is not worth 1 billion dollars – as a brand or as a division in Gucci. As a matter of fact, in 1999 the brand (YSL Couture and YSL Beaute) sold 40 million dollars. Gucci, however, as a stand alone division was worth more than 1 billion dollars (in sales) at the end of 1999. Gucci, as a company, had sales of 1. 236 billion dollars. Who owned Gucci in 1983? In 1983, the ownership of Gucci was shared by four people, all of whom are members of the Gucci family.
Maurizio Gucci, grandson of Gucci’s founder Gucci Gucci through his son Rodolfo, owned 50 percent of the company’s stocks. While Paolo Gucci, Maurizio’s cousin through Aldo Gucci – son of Gucci Gucci, and his two brothers owned 11 percent each. Aldo Gucci owned 17 percent. Why are financial results ` believed to be`? In 1998, it was estimated that 35 companies shared 60 percent of the luxury goods market, and six of these companies were believed to have revenues in excess of 1 billion.
I think that the 1 billion sales revenue figures for the six companies were just an estimate. Financial reporting requirements in that time are not as stringent as they are today: the case writers could only based their estimates on a graph by Nathalie Schneider and Bruno de la Rochebrochard on luxury goods brands sales and operating margins in 1998. What are relative advantages of private vs public ownership?
The foremost advantage of a private ownership against a public ownership is the close link that the owners have, and their stronger involvement in managing the corporation as shown by Marizio Gucci and the rest of the Gucci family in the case. Another advantage is that private ownership means fewer owners, and as such there is a higher chance that the essence of the brand stays true to its founder’s. What are risks and rewards of offering stock options to employees?
Employee stock options serve not just as an alternative form of compensation, but also as an important tool to motivate and retain employees. Stock options serve to align the interests of employees and managers with those of the company’s existing shareholders. They give employees a personal stake in the fortunes of the company as a whole, and provide a powerful incentive for employees to contribute their best efforts to the enterprise and to look out for the company’s long-term best interests.
Of course, one of the most controversial risks associated with offering stock options to employees is the dilution of shareholder value. Another thing, because options provide incentives to increase both risk and stock price, firms must realize that as options go underwater, executives might face incentives to invest in risky, negative NPV projects. What was Gucci`s book value in 1993? How might they have arrived at $350 mil as an asking price in 1994? The book value of Gucci which is equal to the shareholders’ equity as it appeared in its balance sheet in 1993 is negative 6 million dollars.
This means that the company had been incurring loses that diminished shareholders’ equity. I think that Gucci considered several factors in calculating the 350 million dollars asking price. These factors include profitability of Gucci (current and in the future), value of the Gucci brand itself and its other brands, the amount that another entity might be willing to pay for an ownership right, market share of Gucci, and intellectual property rights of the company. What increased Gucci`s value between 1994 and 1998?
The value of Gucci in 1998 increased to around 4. 07 billion dollars. This was computed from the value of LVMH’s 34. 4 percent ownership in the company which is estimated at 1. 4 billion dollars. I believe that this increase in value resulted from the successful reorganization within the company which led to better financial performance and higher investor confidence on the future and potential of Gucci. Why would Gucci incorporate in the Netherlands and trade in the Amsterdam and New York Stock markets?
Netherlands is considered as one of the European countries with liberal tax laws while New York is considered the financial center of the world. I think that this is one of the factors why Investcorp decided to publicly list Gucci’s stocks in Amsterdam and New York. What is Artemis? Why did they retain ownership of YSL couture? Artemis bought the haute couture business of YSL in 1999. It is owned by Francois Pinault. At that time, Mr. Pinault was considered as France’s richest man with a net worth estimated to bet at 4.
31 billion pounds. Haute couture is a very profitable and luxurious segment of the fashion industry. As the case said hand-fitted suits were sold at n lower than a $10,000 tag price compared to $2,000 in ready-to-wear. If Sergio Rossi had $59 mil in annual sales, why would Gucci pay $96 mil for 70%? The value of a company is much more than it sales. It might be that the current value of 70 percent of Sergio Rossi at the time of purchase is 96 million dollars.
This value might be a result of the company’s retained earnings over the past few years, the value of the brand, its earnings potentials, and proprietary rights. How does Gucci`s stock price reflect events? At the end of 1998, the stock price of Gucci increased from an steeped decline. This was the time when LVMH started accumulating shares of Gucci. And because the market sensed a demand in Gucci’s shares of stocks, then the market reacted by increasing the stock’s price. The stock’s prices also adjusted (increased) with the acquisitions of YSL and Sergio Rossi.