New designer doubt

Gucci sales fell in the final months of last year as the label struggled to lure more wealthy shoppers to its pricey Double G belts and Princetown slippers. Kering chief executive officer Francois-Henri Pinault warned last month that heavy investments in its labels will put pressure on the group’s profitability this year.

Sabato De Sarno was named as the brand’s new designer last year and he unveiled his first collection in September in Milan, which showed a more elegant and minimalistic aesthetic compared with the colourful looks of his predecessor, Alessandro Michele. Pieces from that collection only started to arrive in some stores last month.

Gucci has long been one of the most volatile of the major luxury brands, its fortunes rising and falling based on buzz around designers like Michele and a predecessor, Tom Ford. That makes Kering overall more vulnerable to shifts in taste.

“The jury is out on whether the Chinese will like the Sabato De Sarno quiet luxury,” analyst Luca Solca and colleagues at Bernstein said, referring to the current trend for more understated looks.

Early ready-to-wear products from the latest Ancora collection by De Sarno are meeting with a “highly favourable reception,” according to Kering. Their availability will increase in coming months, the company said.

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Kering’s unexpected announcement is a “rather worrying signal for the luxury goods sector,” wrote Thomas Chauvet, an analyst at Citigroup. Its biggest label is suffering from “being in the midst of a major design and management transition, with weak performance of carryover items and limited penetration from early products” of the new collection, he added.

Kering started taking action to boost its struggling label two years ago when it began a management shuffle at Gucci by naming a new fashion head in China and Hong Kong. The group then parted ways with Michele and replaced him with De Sarno, a lesser-known designer from Valentino. Then Kering replaced Marco Bizzarri, who’d headed Gucci for about eight years, with Jean-Francois Palus, a longtime lieutenant of Pinault.

While investors believe in the long-term earnings power of Kering’s portfolio, “they need to see proof points on Gucci’s ability to regain some market share lost to its key rivals in 2020-23 or at least see some green shoots,” Stifel analyst Rogerio Fujimori wrote.

In the meantime, Kering has been active on the acquisition front, buying fragrance maker Creed as well as a 30 per cent stake in Valentino. Yet none of these deals is transformational, leaving the company heavily dependent on Gucci for now.

Bloomberg

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