{"id":139171,"date":"2022-11-25T19:05:45","date_gmt":"2022-11-25T19:05:45","guid":{"rendered":"https:\/\/harchi90.com\/why-gucci-wanted-a-change-and-whats-next\/"},"modified":"2022-11-25T19:05:45","modified_gmt":"2022-11-25T19:05:45","slug":"why-gucci-wanted-a-change-and-whats-next","status":"publish","type":"post","link":"https:\/\/harchi90.com\/why-gucci-wanted-a-change-and-whats-next\/","title":{"rendered":"Why Gucci Wanted A Change \u2014 And What’s Next"},"content":{"rendered":"
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This week, Gucci announced it would part ways with its star designer Alessandro Michele, stunning many brand devotees and even fashion insiders.<\/p>\n

\u201cHe was magic,\u201d reality-TV star and drag performer Detox said on Instagram. \u201cA true icon,\u201d jewelery designer Alex Monroe chimed in. \u201cMichele added a billion a year to Gucci and people still demand more,\u201d fashion editor Alexander Fury wrote in a profanity-laced post responding to the move.<\/p>\n

Others called out recent repetitiveness in Michele’s work, or welcomed a shift away from \u201ccircus fashion\u201d. For months, Gucci and its parent company Kering had laid the groundwork for a potential transition \u2014 bolstering its design ranks with a new chief merchandising officer and expanded studio team while citing the need for a positioning that’s more luxurious and more timeless (read: less maximalist and designer-driven).<\/p>\n

From 2015 to 2019, under Michele and CEO Marco Bizzarri Gucci delivered the most successful turnaround in the history of the luxury industry, fueled by a 360-degree rebrand that went all-in on the designer’s campy magpie aesthetic. Sales more than doubled while profits quadrupled at the brand, which drove the fashion agenda and helped usher in a new generation of young luxury consumers drawn to its sporty styles and bold merchandising.<\/p>\n

Was Kering wrong to want more? To be sure, Gucci experienced a heavy hit than most rivals during the pandemic and took longer to get sales back to pre-virus levels. This was in part due to a higher exposure to struggling channels like wholesale, off-price and travel retail. But as the company succeeded in scaling back that exposure, Gucci’s continued underperformance versus peers became harder not to see as a sign that consumer interest for Michele’s aesthetic was fading.<\/p>\n

Gucci is expected to cross a major threshold this year as analysts forecast sales of \u20ac10.75 billion, up around 10 percent year-on-year. But the broader luxury market is estimated to grow almost twice as fast, up 22 percent this year, according to Bain.<\/p>\n

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Models walk the runway of the Gucci Twinsburg Show during Milan Fashion Week Spring\/Summer 2023. <\/span>(Getty Images)<\/p>\n<\/figcaption><\/figure>\n

While fashion watchers often love to parse leading indicators like social media buzz or brand rankings by 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, particularly by markets. As Italy’s biggest fashion brand, and luxury fashion’s third biggest name overall (trailing just behind Louis Vuitton and Chanel), Gucci is expected to outgrow the market using its near-unparalleled resources for marketing, innovation and investment. Seen through the lens of slower-than-average growth, therefore, Gucci’s record sales could actually suggest a brand that is losing heat.<\/p>\n

Underperforming rivals may be particularly undesirable from Kering’s point of view, as the company has positioned itself as a high-growth operation while fighting hard to stake its turf in real estate, design and marketing in competition with the towering budgets of sector-leader LVMH.<\/p>\n

Potential projects to keep bolstering its position \u2014 the group has explored major acquisitions like Moncler, Prada or Burberry, or even a mega-merger with jewelery-focused conglomerate Richemont \u2014 will depend on high levels of support from the market. A lower valuation would mean less-favourable financing for an acquisition, or fewer board seats following a merger.<\/p>\n

Michele, too, could be on to greener pastures. The designer had spoken about being increasingly worn out by his position at the Italian megabrand \u2014 and this was before the company announced it would bolster novelty by implementing a full return to the fashion calendar with 6 collections per year (menswear and womenswear had usually been shown together during his tenure). As one of the industry’s most successful living creators, it’s doubtful that we’ve heard the last of him.<\/p>\n

Financial analysts, for their part, welcomed the move. \u201cGucci is suffering from brand fatigue\u2026 It needs to open a new creative chapter,\u201d Bernstein’s Luca Solca said. \u201cAfter seven years in charge of Gucci’s creative engine, it may well be time for a change,\u201d RBC Capital Markets analyst Piral Dadhania wrote, adding that investors believed \u201ca new approach is required to re-ignite the brand.\u201d<\/p>\n

Still, market reaction to the news was muted: Kering’s stock rose 2 percent in early morning trading Wednesday before quickly giving up gains. Shares ended the week flat, and are still trading 23 percent lower than at the start of the year. It seems likely that investors \u2014 like buyers, critics, and fashion fans \u2014 will remain in a holding pattern regarding Gucci until a new creative direction is revealed.<\/p>\n