A consensus seems to have formed that creative change is needed at Italy’s biggest fashion brand.
On Wednesday, analysts and investors, who have concerns that recent strategic adjustments at Gucci will not be enough to drive growth consistent with industry peers, revolves around a Women’s Wear Daily report citing unnamed sources, said Alessandro Michele, director of Gucci’s creation since 2015, will leave the company.
Bernstein analyst Luca Solca wrote in a note to clients: “Gucci is suffering from brand fatigue. “To get up to speed again, Gucci doesn’t need to go mainstream or become timeless. It needs to open a new creative chapter.”
RBC Capital Markets analyst Piral Dadhania writes: “After seven years in charge of Gucci’s creative engine, perhaps it’s time for a change, adding that institutional investors believe there is a “need to be.” there is a new approach to brand awakening.”
Shares rallied 2 percent in early Wednesday trading, before giving up gains.
After taking the creative reins of Gucci in 2015, Michele rekindled excitement around the Milan-based home, soon dominating the fashion world with its decadent stratification of brand signatures, selling streetwear-inspired and quirky, gender-flexible styles. A comprehensive reorganization of Gucci products, communications and store decor led by Michele and chief executive Marco Bizzarri has attracted a large following of the brand and helped open up a new world. New, younger consumer base for the luxury industry catering to the tastes of more mature buyers.
From 2015 to 2019, Gucci’s sales nearly tripled and profits quadrupled during a period of rapid expansion, unheard of in modern luxury – at a quarterly rate of growth. sometimes up to 50%. This year, Gucci is expected to end the year with annual sales of over 10 billion euros ($10.3 billion), a major milestone for the company.
But Gucci has been hit hard during the coronavirus pandemic — with sales down 22% in 2020 — and since then, Gucci has grown much more slowly than major brand rivals such as Louis Vuitton, Dior and Hermès. Companies whose sales boom as consumers increasingly flock to blue-chip luxury goods are seen as unfashionable.
The slower growth momentum at Gucci is partly due to greater exposure to struggling channels including wholesale, discount and travel retail, which have a share of the business the company has been working to capture. narrow.
But signs of consumer fatigue become harder to dismiss as the novelty element of Michele’s twisted, maximal aesthetic is gone. During a February meeting with journalists, Kering president François-Henri Pinault said he wanted the company’s brands to refocus their efforts on a more timeless approach to luxury.
In recent seasons, Michele’s designs for Gucci have included more subtle, uplifting details: less streetwear and more knitwear or embroidery, and classic handbags using Use one or two key brand cues like ponytail and red and blue stripes instead of layering them with decorative elements like painted flowers, butterfly charms, or cartoon characters. Gucci has hired a new sales executive to revamp its merchandising offering and announced a complete return to the fashion calendar with six collections per year to promote innovation and novelty.
The evolution of Gucci’s collections, however, has struggled to capture the attention of consumers, perhaps drowned out by the designer’s hilarious, wildly consistent message, still is underpinned by unsurpassed runway style (headscarves and eyeglass chains abound) and a vibrant, Old Hollywood red carpet atmosphere.
Sales fell short of estimates in the third quarter, up 9% from 22% growth at LVMH, owner of Vuitton, and 24% growth at Hermès.
Some retailers also seem eager to see the brand explore new avenues, even if a few go as far as lobbying for a re-molded designer.
“It’s growing, but it can grow further,” said Tiffany Hsu, vice president of women’s purchasing at Mytheresa, in a recent interview, though she praised the luxury. importance of eveningwear in Michele’s recent collections and the versatility of the brand’s tailoring. “It’s sophisticated, classy and trendy,” she says.
“It’s really consistent, but for consumers, they need a little stimulation, something new,” said Yiling Hong, founder of fashion boutique Canal Street in Shanghai.
If Kering is willing to make a change, Michele has also suggested that he could use the respite as the brand looks to accelerate its creative cadence. “Working is becoming more and more stressful for me,” he told reporters after his show at Milan Fashion Week in September. “Doing this job is getting more and more complicated… It’s very stressful. You don’t just work on shoes, bags and outfits,” he added. “This fatigue is something else. Behind-the-scenes work [this season] more tired than usual.”
Additional reporting by Lauren Sherman.