Gucci needs creative change, says new consensus

Gucci needs creative change, says new consensus

A consensus seems to have formed that a creative shift is needed at Italy’s biggest fashion brand.

On Wednesday, analysts and investors, who feared Gucci’s recent strategic tweaks might not be enough to accelerate growth in line with its peers, rallied behind a Women’s Wear Daily report citing unnamed sources who said Alessandro Michele, creative director of Gucci 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 reaccelerate, Gucci does not need to generalize or become timeless. He must open a new creative chapter.

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

Shares rose 2% in early trading on Wednesday, before giving up gains.

After taking the creative reins at Gucci in 2015, Michele rekindled excitement around the Milan-based house, quickly dominating the fashion zeitgeist with its decadent layering of brand signatures, streetwear-inspired merchandising and his quirky and fluid style. A comprehensive overhaul of Gucci’s products, communications and store décor, led by Michele alongside Managing Director Marco Bizzarri, attracted a voracious following for the brand and helped usher in a new generation of younger consumers in a luxury industry that catered to the tastes of more mature buyers.

From 2015 to 2019, Gucci’s revenues roughly tripled and profits quadrupled during a period of unprecedented rapid expansion in the modern luxury sector – with quarterly growth rates sometimes approaching 50%. This year, Gucci is expected to end the year with annual revenue of more than 10 billion euros ($10.3 billion), a major milestone for the company.

But Gucci was hit hard during the coronavirus pandemic – with revenue down 22% in 2020 – and since then has grown much more slowly than rival mega-brands like Louis Vuitton, Dior and Hermès, whose sales skyrocketed as consumers increasingly flocked to premium luxury items seen as unlikely to go out of style.

Gucci’s slowing momentum is partly due to higher exposure to struggling channels including wholesale, off-price and travel retail, which the company has since sought to reduce. ‘activity.

From his first shows for the brand, Alessandro Michele layered and remixed Gucci brand signatures to establish an eye-catching maximalist aesthetic.

But the signs of consumer fatigue have become harder to dismiss as the novelty factor of Michele’s twisted, maximalist aesthetic has worn off. In a meeting with reporters in February, Kering Chairman Francois-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 and higher fare: less streetwear and more tailored or embroidered knitwear, and classic handbags that have deployed one or two key signatures of the brand. branding like horse bits and red-green stripes rather than layering them with decorative elements like painted flowers, moth charms or cartoon characters. Gucci hired a new merchandising director to overhaul its retail offering and announced a full return to the fashion calendar with six collections a year in a bid to drive innovation and novelty.

Yet the evolution of Gucci’s collections has struggled to capture consumers’ attention, perhaps drowned out by the designer’s ultra-coherent and funky topline message, which is always reinforced by over-the-top style on the catwalk (the scarves and eyeglass chains abound) and a campy, Old Hollywood vibe on the red carpet.

Sales missed estimates for the third quarter, rising 9% from a 22% jump at Vuitton-owner LVMH and 24% at Hermès.

Gucci Spring/Summer 2023

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

“It’s evolving, but it could evolve more,” said Tiffany Hsu, vice president of womenswear buying at Mytheresa, in a recent interview, though she praised the opulence of evening wear in recent collections. by Michele and the versatility of the brand’s tailoring. “It’s sophisticated, opulent and timely,” she said.

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

If Kering is ready for a change, Michele also hinted that he could enjoy a break as the brand seeks to pick up its creative pace. “The work is getting more and more intense for me,” he told reporters after his show at Milan Fashion Week in September. “It’s more and more complex now to do this work… It’s very intense. You don’t just work on shoes, bags and outfits,” he added. “This fatigue is something different. Behind the scenes work [this season] was more tiring than usual.

Additional reporting by Lauren Sherman.

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