French luxury group Kering has announced the departure of Gucci creative director Alessandro Michele after a period of underperformance at its biggest and most profitable brand.
Kering did not say who would succeed Michele, who has left with immediate effect.
Making the correct new appointment will be key for Kering because the Italian brand brings in about two-thirds of annual operating profit but has been growing more slowly than rival brands like LVMH’s Louis Vuitton and Dior in recent years. Investors have questioned why a promised turnround has been slow to materialise and also whether Kering is too reliant on Gucci.
François-Henri Pinault, the chair and chief executive of the family-backed Kering, thanked Michele for his seven-year tenure. “His passion, his imagination, his ingenuity and his culture put Gucci centre stage, where its place is,” Pinault said in a statement.
Michele said: “There are times when paths part ways because of the different perspectives each one of us may have. Today an extraordinary journey ends for me, lasting more than 20 years, within a company to which I have tirelessly dedicated all my love and creative passion.”
The 49-year-old designer helped drive a period of strong growth at the Italian brand. Sales were flagging when he was promoted from head of accessories to be creative director in 2015 and started to put more eclectic and androgynous styles on the Gucci runway that tapped into the cultural moment. Droves of younger buyers in the US and China flocked to the brand, while Michele often dressed celebrities like pop star and actor Harry Styles.
Revenue at Gucci grew from €3.9bn in 2015 to €9.7bn in 2021, while operating profit more than tripled in the same period. But the pace of revenue growth had been slowing since 2017 when it was at 45 per cent on a comparable basis to 37 per cent in 2018, and 13 per cent in 2019.
Some critics have attributed this to a certain fatigue with Michele’s designs, while the Covid-19 outbreak also dealt a blow to luxury demand. As other brands ramped up the frequency of shows and collections, Gucci instead decided early in the pandemic to slow down, slashing its yearly show schedule from five to two — three for women’s wear, two for men’s — while eliminating its annual cruise and pre-autumn collections. “I don’t think we have enough time to listen to ourselves,” Michele said at the time.
Gucci also embarked on a broad turnround when the pandemic hit — cutting sales through department stores and other wholesale channels and curbing discounts, all while seeking to rejuvenate the look and feel of the designs. Those efforts under the direction of Michele and chief executive Marco Bizzarri have yet to bear fruit.
“Gucci is in the middle of a complex transition,” said Thomas Chauvet, a luxury analyst at Citigroup. “While Kering management has historically been patient on executing turnrounds, the nomination of a new designer could accelerate the pace of change and redefine the brand’s aesthetics.”
In part because of Gucci’s stumbles, Kering shares have underperformed larger luxury rivals such as LVMH, Hermes and Richemont. Another factor is that Kering does not generate as much of its business from leather goods and jewellery, which enjoy higher margins than fashion and clothing.
Kering shares have been flat in the past three years compared to a 75 per cent rise for sector leader LVMH in the same period, while its forward price-to-earnings ratio is 25 per cent lower.
“Gucci is suffering from brand fatigue as Alessandro Michele has been doing more of the same for seven years,” said Luca Solca, analyst at Bernstein. “In order to reaccelerate, Gucci doesn’t need to move to the mainstream or to become timeless. It needs to open a new creative chapter.”