Analysis: Out of fashion: Gucci faces a daunting task to replace the top designer

PARIS. The abrupt departure from Gucci of Alessandro Michele, the extravagant designer who was a favorite of Harry Styles and Lady Gaga, adds pressure on owner Kering as he faces slowing revenue growth at the Italian fashion house.

News of the creative director’s departure after seven years comes as Kering seeks to reinvigorate the label, which accounted for two-thirds of the parent company’s profits last year, and ahead of the lucrative holiday shopping season.

Tensions had been high between the designer and company management, sources told Reuters.

Announcing her departure on Wednesday, Michele referred to “different perspectives that each of us may have.”

Kering Chairman and CEO François-Henri Pinault hailed the designer’s tenure as “a highlight” in Gucci’s history. He did not name a successor.

With no obvious replacement, analysts said Michele’s departure created a void that the label must fill quickly.

“This raises some question marks in our view of the execution and evolution of the brand in the coming months, leaving more uncertainty about the timing of the acceleration of brand momentum,” said JP Morgan analyst Chiara Battistini. , in a research note on Thursday. .

Michele’s departure is “more than the departure of one of the most iconic designers of the last decade,” said Jefferies analysts, who pointed to a likely “deeper rethink” of the label at Kering.

“The next step is necessarily more complicated now,” they added.

Kering’s shares, valued at more than 66 billion euros, have lagged behind rivals in recent years. They have lost a quarter of their value this year.

Graphic: Gucci stocks go out of style: https://fingfx.thomsonreuters.com/gfx/mkt/zdpxdokqopx/gucci.PNG

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FUR LOAFERS

Michele, 49, reinvigorated the brand with her eccentric, gender-fluid styles popular with younger shoppers.

Early hits were the fur-lined loafers, embellished with the brand’s signature horse bit, which sold for more than $1,000 and the Dionysus bag, with a chain strap and two tiger heads, starting at around $900. for mini sizes.

After her rise from accessory design in 2015, she helped drive profits, which quadrupled in 2019 as revenue soared to nearly €10bn from less than €4bn.

In recent years, growth has slowed, while rivals such as Dior and Louis Vuitton, owned by rival luxury group LVMH, have moved ahead.

Third-quarter sales at LVMH’s fashion and leather goods division rose 22 percent, while Gucci grew 9 percent, less than market expectations and which some analysts blamed on diminishing appetite for goods. designer styles.

They have questioned the medium-term objective of annual sales of 15,000 million euros, set in June.

The brand has also suffered from the COVID-19 lockdowns in China, where it has an extensive store network and greater exposure compared to other heavyweights.

China generates about 35 percent of Gucci’s annual sales, according to Barclays estimates, compared with 27 percent for LVMH’s fashion and leather goods division and 26 percent for Hermes.

MOVE QUICKLY

Time is not on the side of the iconic label.

While making such a sweeping change is welcome, “it could take around a year to see the results of any cosmetic change,” UBS said, citing design and production lead times.

Industry watchers say there’s a huge pool of potential creative directors, ranging from big-name designers to relatively unknowns who could be tapped from the inside like Michele was.

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A new director could give the brand a whole new direction with a clean slate approach, as Demna Gvasalia did at Balenciaga, or build on the direction of a previous designer like Anthony Vaccarello, who followed Hedi Slimane at Saint Laurent, said Serge Carreira, head of emerging brands at the French fashion federation FHCM.

“You could also just keep the status quo for a while and take a break for a year or so,” he said. The existing team could continue to design collections, just as Louis Vuitton’s men’s team has done, following the death of designer Virgil Abloh last year.

But given the strength of Michele’s aesthetic and brand identity, a change in positioning could mean more of a “revolution than evolution,” said JP Morgan’s Battistini.

“This, in our view, could mean a period of relative disruption, both operationally and financially, which could further put the Kering rerating story on hold for now,” Battistini said.

($1 = 60.3500 rubles)

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