Tie Rack bounces back from the brink thanks to an Italian family's values

The one-time darling of the stock exchange has benefited from going privateand the Frangis' management nous, writes Richard Adams

Italy is synonymous with the world of fashion, dominating the industry with names such as Gucci, Armani, Prada and... Tie Rack? The quintessential boom and bust 1980s retailer is now firmly part of the world of Dolce & Gabbana et al - thanks to Simone Frangi and his family.

The Frangis were a low-key family running a company based in Como, near Milan, the centre of Italy's fashion industry. Founded in 1959 by Simone's father, Angelo, it was a high quality textile manufacturer with a specialisation in silk-making, supplying labels such as Calvin Klein and Kenzo.

Then, in 1999, the small firm run by Angelo and his children stepped from the picturesque shores of Lake Como into the bear pit of retailing when it bought Tie Rack in Britain. "It was a very brave decision, for historical reasons and in the way Italians do business," says Simone, Angelo's 35-year old son who has headed the family's British acquisition since 1999.

"The Frangi business was very small compared with Tie Rack. Tie Rack at the time had 430 stores and was operating in 27 nations, it was a public company with a very high profile in terms of news coverage. We were coming from a corner of Como with a low profile - in fact, no one had ever heard of us."

Tie Rack certainly had a high profile, but not the sort its new owners wanted. The retailer had become an example of the success and excess of the 1980s, when loud ties and braces were part of the stockbroker uniform, .

By the late 90s, Tie Rack appeared to be producing more profit warnings than sales and its shares had slumped. That was when the Frangis stepped in.

As one of Tie Rack's regular suppliers, the Frangis already had a good idea of the company's operations. Simone was then the 31-year-old director of sales at the family firm and had dealt with Tie Rack as a customer.

"They were doing something totally wrong, I could see that. They were buying far too much in advance and the range was too flat, far too narrow. You have to give people variety, you have to have diversity and you have to evolve.

The Frangis paid £23 million to take Tie Rack private in April 1999, with Bishko retaining a stake, and began injecting old-fashioned Italian family values into the one-time stock market darling.

"For an Italian company like ours, to come to London and become involved with the stock exchange, that's quite unusual. And then to succeed, after four years and still be going, that's an achievement."

By 2001 the Frangis' new unit was back in profit. In its latest financial year, Tie Rack boasted eight million customers worldwide, earning £1.8 million in pre-tax profits on a turnover of £81 million - not Tesco league figures but impressive in a year when some of its main markets such as airport lounges were still suffering from the effects of the September 11th attacks and the SARS outbreak in Asia.

The new owners cut the number of outlets from 430 to 340 but have since slowly expanded, so there are now more than 370 Tie Racks, including eight in Italy with one in Milan.

Would the Frangis consider going public again? "No," he laughs. "Analysts, they want to see growth, and if you have cash they will push you to open more stores, regardless.

The different realities of running a business in Britain and Italy have at times come as a surprise, Simone admits.

"The Italian model is stronger on loyalty, and being family run means there's direct contact by staff with the ownership. Here you have to move on if you want to make progress in your career. In Italy you try to stay inside one company to progress within that company.

Old-fashioned though the Frangi ownership structure may be, the takeover did have the advantages of that buzzword "synergy", a vertical chain of manufacturer and retail outlets.

"The structure of the business was very good, that's what actually caused us to acquire it, because now we are a retailer with a manufacturer behind it.

"What we've done is shorten the lead time, to work more closely to what customers want, and to have a different approach to different markets and do special products for those countries. And to get repeat orders out very quickly."

Part of the change of focus has been to move Tie Rack towards women, so that now sales are roughly split 50/50 between men's and women's items. So why keep the Tie Rack name?

"We definitely thought about changing it. But the awareness of the brand, its name recognition, it is unchallengeable."- (Guardian Service)