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At Gucci, Personal Vision, Business Opportunities at Crossroads

WWD
WWD
 2022-11-28
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MILAN — The dust has settled on the news of Alessandro Michele’s sudden exit from Gucc i — and his parting thoughts are telling.

Thanking Gucci and the company’s team in a statement issued last Wednesday evening, Michele emphasized that his “most sincerest wish [for them is to] continue to cultivate your dreams, the subtle and intangible matter that makes life worth living. May you continue to nourish yourselves with poetic and inclusive imagery, remaining faithful to your values. May you always live by your passions, propelled by the wind of freedom.”

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Indeed, as first reported by WWD a day earlier, sources believed Michele would exit the company in order to stay true to his own values after being asked “to initiate a strong design shift” to reignite significant growth at Gucci . He didn’t agree to change his vision for the brand, however.

Michele’s “precise and consistent aesthetic codes helped turn Gucci around and they were recognized as authentic by the market and by the younger generations, who have a sixth sense about this,” said Giovanna Brambilla, partner at Milan-based executive search firm Value Search. “There were no contradictions between his values, the product and Gucci’s communication. The brand’s community found his narrative consistent, and the touch points he focused on — inclusion, gender fluidity, sustainability, the metaverse — created hype but were seen as authentic and he was supported by the management. Michele probably felt he didn’t want to betray the trust his community had in him and that it made sense to close this adventure with Gucci.”

One Milan-based luxury consultant, who spoke on condition of anonymity, believes that the exit in 2019 of former Gucci executive vice president, merchandising and markets Jacopo Venturini, who is chief executive officer of Valentino , may have been sparked by his own efforts to tone down Michele’s conceptual designs and focus on luxury, in contrast with the designer.

“Ironically, if the customer does not really understand how to get into the designer’s dreamland and imaginative world, but is engaged and excited by all the hype surrounding the brand, the more commercial items with less sophisticated content but more visual impact become hot tickets,” said the consultant. “At Gucci, there was a disconnection between the market and Alessandro’s intellectual concept of the brand. I think Gucci is reevaluating its positioning now. After all, François-Henri Pinault [chairman and CEO of Gucci’s parent Kering ], is seeing the results at Bottega Veneta, for example, where a new injection of creativity [by creative director Matthieu Blazy] continues to bring results to the brand — despite the hefty price tags. So he must be thinking, why not at Gucci, too?”

Another source told WWD that Pinault is looking at a change of pace for the group’s star brand and “trying to recover the uber-luxury consumer.” That is exactly the strategy the luxury titan is said to have wanted at Bottega Veneta. While immensely successful with trend-driven products designed by creative director Daniel Lee, the brand had lost some of its luxury allure, one reason that led to Lee’s abrupt departure.

Kering last month reported that its cash cow Gucci continued to underperform versus the group’s other brands, although organic sales picked up pace in the third quarter. Revenues at the Italian label totaled 2.6 billion euros, up 9 percent on a like-for-like basis, following a 4 percent rise in the second quarter.

That was slightly below a consensus of analyst estimates, which called for a 10 percent increase in comparable sales at Gucci. By comparison, organic sales at LVMH Moët Hennessy Louis Vuitton’s key fashion and leather goods division — which includes Louis Vuitton, Dior, Loewe and other labels — rose 22 percent year-over-year in the third quarter .

Gucci is facing a very demanding basis of comparison in the fourth quarter, since last year sales rose 32 percent year-over-year.

“Gucci is a huge company responsible for an enormous pipeline, with thousands of employees, with major projects, including charity and sustainability initiatives, and any slowdown in projected sales can crimp these projects. So these kinds of decisions are made to carry them forward and not solely to avoid disappointing investors and analysts,” contended Alessandro Maria Ferreri, CEO and owner of The Style Gate consulting firm.

Gucci also has an extensive global retail network, stores that have to carry a wide range of products, Ferreri continued, and he believes Michele’s genderless designs, which sparked numerous imitations and initiated a powerful trend upon his appointment in January 2015, eventually dented the brand’s menswear business, leaving gaps in the stores.

“If you don’t feel the need to design [traditional men’s looks] they are useless to you, but they are not so for a cluster of a very high-end clientele,” opined Ferreri. “Just think of the work done by Louis Vuitton on menswear, which is another world from womenswear. In fact, there are few brands that have the same designer for both categories, and Gucci can do better in menswear. Who knows, maybe they wanted to hire a dedicated men’s designer and Alessandro wouldn’t hear of it?”

Incidentally, Michele’s exit comes ahead of a Gucci return to Milan Men’s Fashion Week, after the designer had experimented with different show formats and timing over the past few seasons, following his own inclinations.

Hours before Kering confirmed Michele’s departure from Gucci, Exane BNP Paribas analysts in a report stated that the designer’s reinvention “triggered a period of hyper growth, which will be remembered in the industry (people in luxury talk about ‘doing a Gucci’ when discussing a brand turnaround).”

Reportedly, Michele was asked to offer timeless and less fashion-oriented products, the report continued, but, as far back as July, the bank’s analysts wrote that “in luxury, the consumer decides which new product becomes timeless rather than design teams” and that “de-emphasising Gucci’s fashion angle would be putting at risk one of the most distinctive elements of its DNA.”

Seeing “more opportunities than risks” in a designer change, the report stated that “external candidates suitable for the job are not obvious. Alessandro Michele was a successful internal promotion and Kering might want to avoid a situation where Gucci would be too dependent on a ‘star designer.’”

As reported, sources have mentioned the names of in-house designers Remo Macco and Davide Renne as potential candidates to succeed Michele, but for the time being Gucci said the company’s design office “will continue to carry the direction of the house forward until a new creative organization will be announced.” The name of Marco Maria Lombardi, a member of Gucci’s design studio, has also been mentioned to WWD.

Analysts at Jefferies emphasized that Gucci has a strong track record in brand “reinvention,” citing Tom Ford before Michele. They characterized this as “more than just the exit of one of the most iconic designers of the last decade,” but underscored that the move, they believe, “highlights the fact that Kering may have opted for a deeper rethink of its largest but also underperforming brand. There is no clear path to change that has been announced yet, nor is it yet known if a deeper reshuffle is on the cards.”

Indeed, sources in Milan also wonder if president and CEO Marco Bizzarri could be headed to a top role within Kering and be succeeded by Saint Laurent CEO Francesca Bellettini. Incidentally, the latter executive, as reported, appeared at the Bain & Co. and Altagamma conference in Milan earlier this month — a first for Bellettini, who has not attended any event here in recent memory.

“There is no escaping the fact that whilst Michele’s tenure between his landmark fall 2015 appearance and the onset of the pandemic has been as impactful and as significant as Tom Ford’s had been post-Investcorp [Gucci’s onetime owner], it is also true that Gucci as a brand had started to significantly underperform its key peers since, and that a change was in the cards,” continued Jefferies. The report added that “the very ingredients that had transformed Gucci in the first years of the Michele tenure were no longer working and that product had become the dominant issue.”

The report noted that Bizzarri and Michele tripled the size of Gucci, “and so the next step is necessarily more complicated now (internal vs. external replacement? divisional split? more managerial changes?), especially at a time of more volatile demand whereby the ‘ambition’ targets flagged at the recent capital markets day looked increasingly out of reach.” The brand’s top supply chains, “superior digital know-how,” customer engagement skills and strong management contribute to reassure investors on Gucci’s “ability to implement change, not necessarily on the timing. We await further news,” Jefferies said.

It is unclear what the future holds for Michele, who has expressed his passion for cinematography — much like Ford — but one source speculated the designer “could be receiving a phone call from Pinault’s archrival Bernard Arnault anytime soon.”

The change in the top creative role at Gucci comes as many storied brands in Italy, from Ferragamo and Bally to Missoni, unveiled for spring the first designs by their new creative directors. Speculation is rife here that Donatella Versace is in talks to renegotiate her contract with Versace’s parent Capri Holdings Ltd., but that Riccardo Tisci, who exited Burberry in September, could be once again considered to succeed her. Tisci was reportedly headed to Versace in 2017 but the match failed to materialize following disagreements between the two designers. At the time, however, the majority of Versace was still owned by the namesake family.

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