It could mean much more than an exit of one stylist from a brand. The farewell this week of Alessandro Michele da Gucci, where he has been creative director since 2015, raises some economic and financial reflections on the owner Kering, which already finds itself having to deal with a slowdown in revenue growth.
The chairman and chief executive officer of Kering, Francois-Henri Pinault, must now not only quickly find a successor to Michele, but also press on the M&A accelerator, according to industry experts.
The exit of the extravagant designer, who recently launched fur-lined loafers, without being indicated one of his successors, falls at a very delicate moment for Kering: on the one hand it finds itself having to reinvigorate the brand, on the other to cope with the Christmas shopping. And this is causing some fear among analysts.
The loss of Michele at this moment “relieves some question marks in our view on the execution and evolution of the brand over the coming months, leaving further uncertainty about the timing of the brand's recovery,” he says Chiara Battistini, analyst of JP Morgan in a note.
On the occasion of Milchele's farewell, Pinault he limited himself to talking about his business: “The path that Gucci and Alessandro have traveled together in recent years is unique and will remain a exceptional moment in the history of this Maison,” he said. But she didn't mention hers succession.
On the other hand, the fifty-year-old designer, a favorite of Harry Styles and Lady Gaga, announcing his departure did not let us know where he will go now, limiting himself to referring to "different perspectives that each of us can have". Analysts said Michele's exit has created a vacuum that the label needs to fill fast.
With Michele, Gucci's revenues have tripled in 5 years
Michele he was a key man in the phenomenal sales growth thanks to its colorful and gender-fluid style. THE revenues of Gucci have almost tripled to 9,6 billion euros between 2014 and 2019. However, recently, perhaps due to the policy of wanting to attract young Chinese buyers according to industry experts, sales have struggled to recover after the pandemic, as instead they did the other luxury brands. In the 2021 Kering, which also owns brands including Bottega Veneta e Yves Saint Laurent, derived just over half of its sales and about three-quarters of its operating profit from Gucci. And in fact, Kering's stock on the Paris stock exchange suffered as a result.
Le Kering shares, worth more than €66 billion, have lagged behind rivals in recent years. This year they have lost a quarter of their value. Today it is 546,80 euros, down by 0,16%.
What the designer's release could mean
The departure of Michele is “much more than the release of one of the most iconic designers of the last decade” say the Jefferies analysts, who pointed to a likely “deeper rethink” of Kering's label and add that “the next step will necessarily be more complicated now”.
While making such a radical change is good, "it could take about a year to see results from any cosmetic change," she said. UBS, citing design and production times.
But, “given the strength of Michele's aesthetics and brand identity, a change in positioning could mean more of a revolution than an evolution” continues Battistini of JP Morgan. “This, in our view, could mean a period of relative disruptionboth operational and financial".
In recent years, growth has slowed, while rivals like Dior and Louis Vuitton, owned by the competing luxury group LVMH, they moved on.
Le third quarter sales of the fashion and leather goods division of LVMH increased by 22%, while Gucci it grew 9%, less than the market expected and some analysts attributed it to the decline in interest from buyers in the designer's extravagant style. Furthermore, some of them questioned themedium-term goal of 15 billion euros in annual turnover, which was set last June.
It might be time to play the M&A card
Pinault's hope is to be able to speed up his search for new brands to reduce his reliance on Gucci, as reported by Reuters. But while Bernard Arnault of LVMH spent billions of euros buying the jewelry maker Tiffany and the hospitality brand Belmond, a group specializing in top-of-the-range hotels and travel, Kering has remained on the sidelines for the moment: it has had talks with Richemont, is in contact with Moncler, while the US brand of the former Gucci designer has recently let slip Tom Ford, which went to the Estée Lauder cosmetics group.
But analysts are wondering what is suitable for Kering on the market: fashion brands, or are they too small to be able to move the situation, such as Tod's. Or closed in a stronghold, like Prada.
