© Reuters. FILE PHOTO: Gucci designer Alessandro Michele arrives at the “Green carpet Fashion Awards” ceremony during Milan Fashion Week in Milan, Italy, September 24, 2017. REUTERS/Stefano Rellandini/File Photo
By Mimosa Spencer
PARIS (Reuters) – The sudden departure of Gucci’s Alessandro Michele, the fashion designer who loved Harry Styles and Lady Gaga, is adding to the pressure on the owner. Dry (EPA:) as it faces a financial crisis at the Italian fashion house.
News of the director’s exit after seven years comes as Kering looks to reinvigorate the brand, which took two-thirds of the parent company’s profits last year, and ahead of the holiday shopping season.
Tensions were high between producers and company management, sources told Reuters.
In announcing her departure on Wednesday, Michele spoke of “the different feelings that each of us may have.”
Kering chairman and CEO François-Henri Pinault hailed the designer’s work as “the best moment” in Gucci’s history. He did not name a successor.
With no successor in sight, experts said Michele’s exit has caused the brand to fill up quickly.
“This raises a number of questions in our opinion about the launch and evolution of the brand in the coming months, and leaves some doubt at a time when the brand is on the rise,” JP Morgan analyst Chiara Battistini said in a research note on Thursday. .
Michele’s departure “is more than just the exit of one of the most influential figures of the last decade,” said analysts at Jefferies, who also expressed “serious consideration” of Kering’s writing.
“The next step is very difficult now,” he added.
Shares in Kering, worth 66 billion euros, have lagged behind competitors in recent years. They have lost a quarter of their value this year.
Images: Gucci shares go out of style – https://fingfx.thomsonreuters.com/gfx/mkt/zdpxdokqopx/gucci.PNG
Michele, who turned 50 on Friday, reinvigorated the brand with her chic, gender-neutral styles that are popular with younger shoppers.
Early hits were the signature fur, horse-embellished clutch, which fetched more than $1,000 and the Dionysus handbag, featuring a chain and two leopard heads, starting at around $900 for smaller sizes.
After being promoted in the production of weapons in 2015, he contributed to the oil profit, which grew four times by 2019 when the revenue rose to almost 10 billion euros from under 4 billion.
In recent years, growth has slowed as rivals such as Dior and Louis Vuitton, owned by luxury group LVMH, have taken the lead.
Third-quarter sales at LVMH’s fashion and leather division rose 22% while Gucci grew by 9%, falling short of market expectations and what some analysts said was the beginning of a decline in the designer’s style.
They question the central objective of annual sales of 15 billion euros, which was established in June.
The brand has also suffered from the COVID-19 lockdown in China where it has more stores and more exposure than other heavyweights.
China accounts for about 35% of Gucci’s annual sales, according to Barclays (LON:) estimate, compared to 27% of LVMH’s fashion and leather sectors and 26% for Hermes.
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Time is not on the sign’s side.
Although such a big change is good, “it may take about a year to see the effects of any change”, said UBS, citing lead times and production.
Industry observers say there is a large pool of creative directors, from big-name producers to relative unknowns who could be tapped in like Michele did.
A new director can give the brand a new direction with a “tabula rasa” approach, as Demna Gvasalia did at Balenciaga, or build on what he has already done like Anthony Vaccarello, who followed Hedi Slimane at Saint Laurent, said Serge Carreira, CEO. for the emerging French Fashion Federation FHCM.
“You can also retain the effects of the spell and rest for a year or more,” he said. The existing team may continue to produce collections, such as the men’s group at Louis Vuitton, following the death of designer Virgil Abloh last year.
But given the strength of Michele’s beauty and style, a change of scenery could mean “more change than change”, said JP Morgan’s Battistini.
“This, in our opinion, could mean a period of disruption, both operationally and economically, which could put Kering’s story on hold for the time being,” Battistini said.
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