A Bid for Star Power

By Unmesh Kher

Even by the high standards of the fashion industry, the buzz about Tom Ford's next move reached a fever pitch early this spring. Rumor was that the celebrity designer--who over the course of a decade helped transform the Gucci Group from a $200 million purveyor of leather goods to a $3 billion luxury conglomerate--was being wooed to be creative director of cosmetics giant Estee Lauder. Would Ford be hired to revive its flagging eponymous brand (which has lately developed a somewhat dowdy aura, putting a damper on sales)? The New York Post claimed that Leonard Lauder, the former chief executive and father of current CEO William, opposed the deal; that Aerin Lauder, Leonard's niece, who oversees creative aspects of the brand, such as advertising and packaging, was for it; and that this had created a rift in the family, which owns 88% of the $5.8 billion company's voting shares.

The speculation was put to rest in mid-April when Estee Lauder revealed that Ford--along with Domenico de Sole, Gucci's former CEO and Ford's partner in building and then fleeing the company--is indeed signing on but not as a hire. In one of two deals that will launch a privately owned Tom Ford luxury brand, the Texas-born designer--who long maintained that he would never put his name on a label--will design a limited line of beauty products due out this holiday season under a Tom Ford for Estee Lauder label and follow up with a stand-alone series of cosmetics and fragrances. The Lauder brand, it seems, will benefit mainly by association.

That's apparently sufficient for now. Despite the troubles of its flagship label, and growing competition from giant mass marketers like Procter & Gamble and Avon, Lauder's revenues have been climbing at an 8% clip annually. "If the deal works, great," says Linda Bolton Weiser, an analyst at Oppenheimer & Co. "If it doesn't, they aren't betting the ranch." Hip makeup brands like M.A.C. and Bobbi Brown and a stable of high-margin skin creams and hair-care products should keep the company growing in the short term. Ford says he'll be mining Lauder's archives for ideas. "I'll be able to reintroduce the Lauder brand to a generation that really doesn't remember the iconic things Estee introduced in the 1960s and '70s," he says, referring to the company's founder, who died at 97 in April last year, around the same time Ford left Gucci in a huff.

Though many of Lauder's 23 brands are celebrity and designer lines, no outsider has shared real estate with the Lauder name in the label's 59-year history. Still, William Lauder denies that the family is divided about the Ford alliance. Indeed, he says, Leonard Lauder himself set the wheels of the deal in motion after De Sole approached him last summer in Aspen, Colo., where the two own homes. But the quidnuncs were half right. John Demsey, who ran the M.A.C. business before becoming global president of the Lauder brand in January, admits that he and Aerin Lauder pushed to include Ford's name on the label.

There are risks. "Lauder is as clean-cut as clean-cut can be, and very, very all-American," observes Jamie Ross of the Doneger Group. Ford is the opposite--an impish provocateur whose designs and ad campaigns for Gucci infamously oozed sexuality. Demsey says he and Aerin will work with Ford on the shared label. Demsey also points out that an ad campaign approved by Estee in 1960 for Lauder's Youth Dew bath oil featured a nude woman. "There's a misconception about the conventionality of Estee Lauder," he says. "If she were here today, she would love this."