Gucci Needs Creative Change, Says New Consensus

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

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

“Gucci is suffering from brand fatigue,” Bernstein analyst Luca Solca wrote in a note to clients. “In order to reaccelerate, Gucci doesn’t need to move to the mainstream or to become timeless. It needs to open a new creative chapter.”

“After seven years in charge of Gucci’s creative engine, it may well be time for a change,” RBC Capital Markets analyst Piral Dadhania wrote, adding that institutional investors believe “a new approach is required to re-ignite the brand.”

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

After taking the creative reins of Gucci in 2015, Michele reignited excitement around the Milan-headquartered house, soon dominating the fashion zeitgeist with his decadent layering of brand signatures, streetwear-inspired merchandising and quirky, gender-fluid styling. An all-encompassing revamp of Gucci’s products, communications and store decor spearheaded by Michele alongside chief executive Marco Bizzarri attracted a voracious following for the brand, and helped usher in a new, younger generation of consumers to a luxury industry that had been catering to 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 had never been seen in the modern luxury sector — with quarterly growth rates at times approaching 50 percent. This year, Gucci is expected to close the year with annual revenue over 10 billion euros ($10.3 billion), a major milestone for the company.

But Gucci took a heavy hit during the coronavirus pandemic — with revenues falling by 22 percent in 2020 — and since then has been growing far more slowly than mega-brand rivals like Louis Vuitton, Dior and Hermès, whose sales exploded as consumers increasingly flocked to blue-chip luxury items seen as unlikely to go out of style.

The slower momentum at Gucci has in part been due to a higher exposure to struggling channels including wholesale, off-price and travel retail, whose share of the business the company has since worked to scale back.

But signs of consumer fatigue became harder to dismiss as the novelty factor of Michele’s twisted, maximalist aesthetic wore off. In a February meeting with journalists, 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, elevated fare: less streetwear and more tailoring or embroidered knits, and classic handbags that deployed one or two key brand signatures like horse-bits and red-green stripes rather than layering them with decorative elements like painted flowers, moth-shaped charms or cartoon characters. Gucci hired a new merchandising director to revamp its commercial offer, and announced a full return to the fashion calendar with six collections per year in a bid to boost innovation and newness.

Still, the evolution within Gucci’s collections has struggled to catch consumers’ attention, perhaps drowned out by the designer’s ultra-consistent, funky topline message, which is still being reinforced by over-the-top styling on runways (headscarves and eyeglass chains abound) and a campy, Old Hollywood vibe on the red carpet.

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

Gucci Spring/Summer 2023

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

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

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

If Kering is ready to make a change, Michele, too, has hinted he could use a break just as the brand seeks to accelerate its creative rhythm. “Working is becoming more and more intense for me,” he told reporters following his show at Milan Fashion Week in September. “It’s more and more complex now doing this job … It’s very intense. You’re not just working on shoes and bags and outfits,” he added. “This tiredness is something different. The backstage work [this season] was more tiring than usual.”

Additional reporting by Lauren Sherman.

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