At Gucci, La Vita Is No Longer So Dolce

The global downturn is disproving the notion that luxury goods are recession-proof, especially for Italy's Guccio Gucci. In tony shops from Milan to New York to Tokyo, Gucci purveys pricey items, such as $1,500 boar-hide briefcases and $275 suede pumps, to the world's affluent. But sales are slumping, and the company is losing money. As a result, sources say, Bahrain-based Investcorp International, the secretive investment group bankrolled by gulf Arabs, is quietly trying to sell off its 50% stake in Gucci. Investcorp declines to comment.

These troubles are a bitter setback for Maurizio Gucci, the Florentine retailer's 44-year-old president and chief executive, who set out four years ago to restore Gucci to its former preeminence among the world's elite retailers. A major blow has come from the recession in the U.S., which traditionally accounts for 45% of Gucci's sales. But critics say Maurizio's own free-spending style may have undercut his rebuilding strategy.