A consensus seems to have formed that creative change is needed for Italy’s biggest fashion brand.
On Wednesday, analysts and investors, who have raised concerns that recent strategic adjustments at Gucci will not be enough to accelerate growth in line with peers, rallied around a Women’s Wear Daily report citing unnamed sources as saying 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. “To re-accelerate, Gucci doesn’t need to go mainstream or become timeless. It must 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 needed to reignite the brand.”
Shares rose 2 percent in early trading Wednesday, before giving up gains.
After taking the creative reins at Gucci in 2015, Michele stirred excitement around the Milan-headquartered house, soon dominating the fashion zeitgeist with her 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 led by Michele alongside CEO Marco Bizzarri attracted a voracious following for the brand, helping usher in a new, younger generation of consumers to a luxury industry that had catered to the tastes of more mature buyers .
From 2015 to 2019, Gucci’s revenue roughly tripled and profits quadrupled during a period of rapid expansion never seen in the modern luxury sector – with quarterly growth rates at times approaching 50 percent. This year, Gucci is expected to end the year with an annual turnover of more than 10 billion euros ($10.3 billion), a major milestone for the company.
But Gucci was hit hard by the coronavirus pandemic – with revenue falling 22 percent in 2020 – and since then has grown far more slowly than mega-brand rivals such as Louis Vuitton, Dior and Hermès, whose sales exploded as consumers increasingly flocked to blue -chip luxury items considered unlikely to go out of fashion.
The slower momentum at Gucci is partly due to a higher exposure to struggling channels, including wholesale, discount and travel, whose share of the business the company has since worked to reduce.
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 reporters, 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, high-end fare: less streetwear and more tailoring or embroidered knitwear, and classic handbags that have used one or two key brand signatures like horse bits and red-green stripes rather than layering them . decorative elements such as painted flowers, moth-shaped charms or cartoon characters. Gucci hired a new merchandising director to revamp its commercial offering and announced a full return to its six-collection-a-year fashion calendar in a bid to boost innovation and novelty.
Yet the evolution of Gucci’s collections has struggled to capture consumers’ attention, perhaps drowned out by the designer’s ultra-consistent, funky top-line message, which is still reinforced by over-the-top styling on the 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 with a 22 percent jump at Vuitton owner LVMH and 24 percent growth at Hermès.
Some retailers also seem eager to see the brand explore new avenues, though few would go as far as lobbying for a designer overhaul.
“It’s evolving, but it could evolve more,” Tiffany Hsu, Mytheresa’s vice president of womenswear buying, said in a recent interview, even as she praised the opulence of eveningwear in Michele’s recent collections, and the versatility of the brand’s tailoring. “It’s sophisticated, opulent and contemporary,” she said.
“It’s very consistent, but for consumers, they need a little kick, something fresh,” said Yiling Hong, founder of Shanghai store Canal Street.
If Kering is ready to make a change, Michele has also hinted that he could use a break just as the brand tries to accelerate its creative rhythm. “Working is becoming more and more intense for me,” he told reporters after his show at Milan Fashion Week in September. “It’s more and more complicated now to do this job… It’s very intense. You don’t just work with 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.