Gucci needs creative change, says new consensus

Gucci needs creative change, says new consensus

A consensus seems to have emerged that creative change is needed at Italy’s biggest fashion brand.

On Wednesday, analysts and investors, who had raised concerns that recent strategic tweaks at Gucci won’t be enough to accelerate growth in line with industry peers, gathered around a report from Women’s Wear Daily, citing unnamed sources who said Alessandro Michele, Gucci’s creative director since 2015, is about to leave the company.

“Gucci is suffering from brand fatigue,” Bernstein analyst Luca Solca wrote in a note to clients. “To accelerate again, Gucci doesn’t have to move into the mainstream or become ageless. It should open a new creative chapter.”

“After seven years of leading Gucci’s creative engine, it may be time for a change,” wrote RBC Capital Markets analyst Piral Dadhania, adding that institutional investors believe “a new approach is needed to renew the brand.” to breathe life into.”

Shares rose 2 percent in early trading Wednesday before giving up gains.

After taking over the creative reins of Gucci in 2015, Michele reignited the excitement around the Milan-headquartered house and quickly dominated the fashion zeitgeist with his decadent layering of brand signatures, streetwear-inspired merchandising and quirky, gender-fluid styling. A comprehensive revamp of Gucci’s products, communications and store design spearheaded by Michele along with CEO Marco Bizzarri attracted a voracious following for the brand and helped usher in a new, younger generation of consumers into a luxury industry that had focused on the tastes of more mature buyers.

From 2015 to 2019, Gucci’s revenues roughly tripled and profits quadrupled during a period of rapid expansion the likes of which has never been seen in the modern luxury sector — with quarterly growth rates approaching 50 percent at times. This year, Gucci is expected to close the year with annual sales of more than 10 billion euros ($10.3 billion), a major milestone for the company.

But Gucci took a serious hit during the coronavirus pandemic — with sales dropping 22 percent in 2020 — and has since grown much more slowly than mega-brand rivals like Louis Vuitton, Dior and Hermès, whose sales exploded as consumers increasingly flocked to blue-green. chip luxury items that are believed not likely to go out of style.

The slower momentum at Gucci is due in part to increased exposure to struggling channels, including wholesale, off-price and travel retail, which the company has since worked to scale back the company’s share of.

From his first runway shows for the brand, Alessandro Michele has layered and remixed Gucci's brand signatures to create an eye-catching maximalist aesthetic.

But signs of consumer fatigue became harder to ignore as the novelty factor of Michele’s twisted, maximalist aesthetic wore off. Meeting with journalists in February, Kering chairman 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 understated, more upscale fare: less streetwear and more tailored or embroidered knits, and classic handbags that used one or two key brand signatures like horse bits and red-and-green stripes instead of combining them with decorative elements such as painted flowers, moth-shaped charms or cartoon characters. Gucci hired a new merchandising director to revamp its commercial offerings and announced a full return to the fashion calendar with six collections a year in an effort to drive innovation and novelty.

Yet the evolution within Gucci’s collections has struggled to capture consumer attention, perhaps drowned out by the designer’s ultra-consistent, funky topline message, which is still reinforced by over-the-top styling on catwalks (headscarves and eyeglass chains are galore) and a campy, Old Hollywood vibe on the red carpet.

Sales beat estimates for the third quarter, rising 9 percent compared to a 22 percent increase at Vuitton-owner LVMH and a 24 percent growth at Hermès.

Gucci spring/summer 2023

Some retailers, too, seem eager to see the brand explore new avenues, even though few would go so far as to lobby for a designer reshuffle.

“It’s evolving, but it could evolve even further,” Tiffany Hsu, Mytheresa’s vice president of womenswear sourcing, said in a recent interview, though she appreciates the opulence of the eveningwear in Michele’s recent collections and the versatility of the tailoring. of the brand praise. “It’s sophisticated, opulent and timely,” she said.

“It’s really consistent, but for the consumer, they need a kick, something fresh,” said Yiling Hong, founder of Shanghai boutique Canal Street.

If Kering is ready to make a change, Michele has also hinted he could use a break as the brand tries to accelerate its creative rhythm. “Work is getting more and more intense for me,” he told reporters after his Milan Fashion Week show in September. “It’s getting more and more complex to do this work now… It’s very intense. You don’t just work on shoes and bags and outfits,” he added. “This fatigue is something else. The backstage work [this season] was more tiring than usual.”

Additional reporting by Lauren Sherman.

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