This week, Gucci announced it was parting ways with star designer Alessandro Michele, which stunned many brand aficionados and even fashion insiders.
“He was magical,” reality TV star and drag performer Detox said on Instagram. “A true icon,” agreed jewelry designer Alex Monroe. “Michele added a billion dollars a year to Gucci and people are still asking for more,” fashion editor Alexander Fury wrote in a profanity post responding to the move.
Others mentioned the recent repetition in Michele’s work, or welcomed a move away from “circus fashion.” For months, Gucci and parent company had Kering laid the foundation for a potential transition — bolstering the design ranks with a new chief merchandising officer and an expanded studio team, while citing the need for a positioning that’s more luxurious and timeless (read: less maximalist and designer-driven).
From 2015 to 2019, under Michele and CEO Marco Bizzarri, Gucci delivered the most successful turnaround in luxury industry history, fueled by a 360-degree rebrand that went all-in on the designer’s campy magpie aesthetic. The brand’s sales more than doubled and profits quadrupled, driving the fashion agenda and helping usher in a new generation of young luxury consumers drawn to its sporty styles and bold merchandising.
Was Kering wrong to want more? Sure, Gucci took a harder hit than most rivals during the pandemic and took longer to get sales back to pre-virus levels. This was due in part to increased exposure to struggling channels such as wholesale, off-price and travel retail. But as the company managed to scale back that exposure, it became harder not to see Gucci’s continued underperformance against competitors as a sign that consumer interest in Michele’s aesthetic was waning.
Gucci is expected to cross a major threshold this year as analysts forecast sales of €10.75 billion, up about 10 percent year-on-year. But the broader luxury market is estimated to grow nearly twice as fast, up 22 percent this year, according to Bain.
While fashion watchers often like to dissect leading indicators such as social media buzz or brand rankings from the likes of Interbrand and Kantar (where Gucci has continued to thrive), topline growth is often seen as the most reliable arbiter of brand interest, especially by markets . As Italy’s largest fashion brand and the third largest name overall (after Louis Vuitton and Chanel), Gucci is expected to outgrow the market with its almost unparalleled resources for marketing, innovation and investment. Seen through the lens of slower-than-average growth, Gucci’s record sales could therefore point to a brand losing heat.
Underperforming rivals may be particularly undesirable from Kering’s point of view, as the company has positioned itself as a high-growth company as it fights hard to leverage its real estate, design and marketing real estate to compete with industry leader LVMH’s skyrocketing budgets.
Potential projects to continue strengthening its position – the group has explored major acquisitions such as Moncler, Prada or Burberry, or even a mega-merger with jewelry-focused conglomerate Richemont – will depend on a high degree of market support. A lower valuation means less favorable financing for an acquisition, or fewer board seats in a merger.
Michele, too, could go to greener pastures. The designer had talked about getting more and more worn out through his position with the Italian mega-brand – and this was before the company announced it would amp up novelty by implementing a full return to the fashion calendar with 6 collections a year (menswear and womenswear were mostly shown together during his tenure). As one of the industry’s most successful living creators, it’s doubtful we’ve heard the last of him.
Financial analysts, for their part, applauded the move. “Gucci is suffering from brand fatigue… It should open a new creative chapter,” said Bernstein’s Luca Solca. “After seven years of leading Gucci’s creative engine, it may be time for a change,” RBC Capital Markets analyst Piral Dadhania wrote, adding that investors believed “a new approach is needed to revitalize the brand.” to blow in.”
Still, the market’s reaction to the news was muted, with Kering’s stock rising 2 percent in early morning trading on Wednesday before quickly giving up gains. Equities ended the week flat, still trading 23 percent lower than at the beginning of the year. It seems likely that investors – such as buyers, critics and fashion fans – will keep Gucci in a steady pattern until a new creative direction is revealed.
And what should Gucci do now?
Kering has honed a playbook of leaning on brand insiders, or new and emerging creative directors, to put a bold new spin on its brands. Michele’s Gucci or Sarah Burton’s Alexander McQueen are examples of the first approach; Daniel Lee’s revamp of Bottega Veneta or Demna’s Balenciaga illustrate the latter.
However, reviving the current Gucci’s mission could prove more challenging than previous U-turns: Michele’s decadent take on the brand often involved combining many brand signatures from the different creative eras at once. It will not be easy to gain a new foothold from the brand’s archives.
On the other hand, a team tasked with generating bold, new design ideas – as was Lee’s brief at Bottega Veneta – would certainly excite the market. But using novelty to power a $10 billion-a-year mega-brand is a riskier business than a $1 billion house like Bottega Veneta. On Gucci’s current scale, the brand will have to walk a tightrope between fashion excitement and long-term desirability.
For now, Gucci is sticking to the “timelessness” brief, leaning on its expanded studio team and new merchandising director to steer the ship until a successor is announced.
THE NEWS IN BRIEF
FASHION, BUSINESS AND THE ECONOMY
Raf Simons closes his label. The Spring/Summer 2023 collection which will be screened in London in October will be the label’s last, Simons said in a statement posted to Instagram on Monday.
Balenciaga apologizes after allegations it sexualized children in ads. The label deleted photos with children holding teddy bears dressed in what appeared to be bondage gear after the footage sparked outrage on social media.
Louis Vuitton scores most ‘likes’ on Instagram ever with viral football campaign. The Baggage campaign with Annie Leibovitz lens harnessed the power of football superstars Cristiano Ronaldo and Lionel Messi.
Adidas is investigating allegations that Kanye West assaulted employees. The accusations kept piling up about the rapper’s erratic behavior and treatment of designers and other employees at Adidas, whose partnership with Ye was once one of the most successful in the industry’s history.
Cloakroom Collective prohibits fast fashion. About 5 percent of listings will be affected by the move, the resale site said, as it tries to position itself as a environmentally conscious player at the top end of an increasingly competitive market.
Nordstrom lowers profit forecast due to rising costs. The companies total sales decreased to $3.55 billion in the third quarter, from $3.64 billion a year earlier.
Abercrombie sees better sales in the holiday quarter and makes surprising profits. Chief executive officer Fran Horowitz said the company expects fourth quarter “mirror more pre-pandemic” vacation.
Frasers Group acquires Gieves & Hawkes. The acquisition secures the 250-year-old brand long-term futuresaid Frasers CEO Michael Murray.
Primark invests £140 million in retail property. The budget retailer said the investment includes and will open at least four new stores create at least 850 jobs.
Hong Kong loses top spot for luxury shopping to New York. from Manhattan Upper Fifth Avenue is now the most expensive street worldwide for shopping, according to a survey by commercial real estate firm Cushman & Wakefield Plc. Hong Kong’s Tsim Sha Tsui neighborhood comes in second, followed by Italy’s Via Montenapoleone in Milan.
UN summit COP27 ends with last-ditch deal for historic climate damage fund The talks in Egypt ended with an agreement to support poorer countries in paying for the damages caused by climate change.
Sephora appoints Guillaume Motte as CEO. The former deputy general manager of LVMH Fashion Group succeeds Chris de LaPuente, who took over in June. Motte’s appointment comes as Sephora re-enters the UK market.
Woolmark Prize names finalists 2023. Australian fashion prize for young talent selected A. Roege Hove, Bluemarble, Lagos Space Program, Marco Rambaldi, Maxxij, Paolina Russo, Rhude and Robyn Lynch as finalists for the 2023 award.
MEDIA AND TECHNOLOGY
JD.com to cut top executives’ salaries amid China’s ‘communal prosperity’ push. The e-commerce giant said it did on Tuesday cutting the salaries of more than 2,000 senior managers next year by 10 to 20 percent.
China’s Fosun wants to sell its stake in Cainiao, the logistics arm of Alibaba. Fosun has appointed a financial advisor to execute the sale of its less than 5 percent stake in Cainiao and the plan is in the early stages, according to sources familiar with the matter.
Curated by Darcey Sergison.