High turnover continues at Gucci, sales in China worsen
MISS tweed
22 September 2024
MILAN -Sabato De Sarno's latest fashion show on Friday marked a slight improvement in terms of coolness and impact thanks to a Gucci collection brimming with elegant and glamorous outfits harking back to the 1960s. It was a natural evolution of the Italian designer's style, oozing more maturity and self-confidence. But it did not get the fashion crowd so excited that it's likely to change the overall downward trajectory of the Italian luxury brand, industry sources predicted.
Gucci, Kering's biggest business and source of profit, continues to struggle in major markets such as China, industry and internal sources said. Key managers are leaving the company and many positions remain vacant, they said.
Federico Turconi, CEO and President of Gucci U.S., left this month as did Alexis Katana, the company's vice president in charge of global media. Their exits follows the departures of many other important staff including Gucci's chief marketing officer Jonathan Kiman - now at Burberry. There's been a high turnover at Gucci's marketing, merchandising and public relations teams in the past six months, as Miss Tweed reported. Many positions - including that of chief marketing officer - remain vacant. Gucci declined to confirm or comment on the departures.
Stefano Cantino, let go in April by LVMH's Louis Vuitton where he was in charge of communications and events, started as Gucci's deputy chief executive in early May.
Staff say Cantino is expected to replace CEO Jean-François Palus, possibly as early as January.
Since he arrived a year ago, Palus has not succeeded in building strong ties with teams, staff say. "Palus does not appear to be very involved with the brand," one internal source said. "We rarely see him or interact with him."
Palus, a senior member of Kering's executive committee and longtime friend of CEO François-Henri Pinault, left the group's board last year and is preparing to move on from Gucci, internal sources at the group say.
The mood at Gucci is somber. "People know that it will take time for the brand's sales to improve and with such high turnover, they have the feeling that they can be sacked any moment," another internal source said.
Some staff who left say the management structure of Gucci is unclear and the decision-making process is not very fluid. Who's really in charge at Gucci? De Sarno? Palus?Cantino? Or Francesca Bellettini, Kering's co-CEO who oversees all of the group's luxury brands? The brand's previous boss, Marco Bizzarri, was difficult to work with, staff say.
But at least he federated teams around clear objectives and drove them to deliver results, industry sources say.
More importantly, it's not clear how long De Sarno will stay at Gucci's creative helm.
FASHION SHOW
The designer's latest fashion show was a continuation of what he presented before- nice clothes but nothing to write home about, fashion critics and retailers said. "Top clients liked it but what is the message? What does the brand stand for now?" asked one multi-brand retailer.
De Sarno's collection included shiny leather jackets and matching skirts and see-through lace dresses in his trademark Ancore burgundy red. There were also a few Greek goddess toga-style dresses slit open on the side, worn with a tubular golden necklace and arm bracelets. The theme was "casual grandeur," De Sarno said in his notes about the show. Not everyone understood what it meant and reactions on social media were mixed, as they have been before.
Some loved his shimmering dresses and oversized bright colored coats worn with Jackie Kennedy Onassis-style headscarf and oversized sunglasses. Others found that there were a lot of generic clothes that could have been designed by any brand. Why would a customer want to spend vast amounts on an outfit if you cannot tell that it's Gucci?
Kering wants Gucci to be about timeless elegance, but critics say the brand is not taking a strong enough stance in terms of design. As a result, it does not stand out in the ultra-competitive global fashion market. In the current tough climate, customers have become reticent to spend on luxury goods. They need a compelling reason to open their wallet and pull out their credit card. They want to be wowed and surprised. Gucci has not managed to achieve that yet.
Since De Sarno started in May last year, Gucci's marketing campaigns have been relatively bland, often featuring a model posing on a white backdrop with Gucci printed in white. The brand's unexciting campaigns could be symptomatic of the lack of clear direction among the brand's communication and top management teams. No one is ready to take any risk or say anything too strong or provocative.
DARING
At a Mediobanca luxury goods conference in Milan this week, former Gucci CEO Marco Bizzarri complained of how boring and monotonous many big luxury brands had become. This is partly because their creative directors were not given enough freedom to try out new things. "The sector is also suffering because there is a lack of innovation...
no one dares," he said.
De Sarno's looks are elegant, chic and wearable, critics say, but they've not been flying off the shelves. Kering reported in July that Gucci's turnover fell 20 percent in the first half and suffered an even bigger decline in China, one of its biggest markets. Its performance in China has worsened in recent months, several industry sources have said, which does not augur well in terms of profitability.
Kering cut its full-year financial performance expectations for the third time in July, issuing a profit warning and publishing a 19 percent drop in second-quarter sales for Gucci.
Kering reported a 42 percent drop in first-half operating profit and said it would be down 30 percent in the second half compared with the same period last year.
Kering shares have lost more than 42 percent since the beginning of the year and are now trading at the same level they were back in 2017. The shares of rivals like Richemont and LVMH have also suffered, but they are still much higher than they were seven or eight years ago.
Kering investors have lost patience and many of them have given up on the stock, which partly explains why the shares have fallen so much. Luxury and fashion are about selling dreams. De Sarno's dreams do not appear to have captured customers' imagination as much as Kering hoped.
Several industry sources said Cantino was thinking of alternatives to De Sarno as creative director for Gucci. He's been in contact with Fabio Zambernardi, Prada and Miu Miu's former designer director who retired a year ago after four decades working alongside Miuccia Prada. But fashion veterans say Zambernardi made so much money at Prada, he does not need to work anymore. It's also far from certain that his Prada-imprinted style would fit Gucci. "Zambernardi is very talented and highly regarded but I'm not sure he would want to come back to the fashion circus," one Prada source said
