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Gucci had better be careful not to fix what ain’t broke ~ Washington


I’ll never forget: singer-songwriter Harry Styles in a typical British fish and chip shop with a chicken.

To me, this Fall 2018 campaign for Gucci’s menswear collection embodies everything that Alessandro Michele brought to the Italian fashion house as Creative Director. His approach was quirky, yet commercial. He was recruiting an A-list star for a blockbuster marketing campaign, but he wasn’t shy with that trademark touch of eccentricity.

The blueprint won Michele an army of young fans at the 100+ year old label and generated growth never before seen in the fashion industry.

More recently, however, Gucci has struggled and Michele is now stepping out, parent company Kering SA said on Wednesday. So far, no replacement has been named. The design team will continue until a successor is announced.

A new vision could reboot Gucci once again and reignite its stellar sales growth. But while the fashion company is slowing down after a phenomenal run, it’s not cracking at the seams. Kering will need to use all its skills to ensure demand for horsebit loafers and Dionysus bags is not disrupted.

It’s hard to overstate Michele’s impact on Gucci, as well as the broader fashion industry. Upon his appointment in 2015, he introduced a bold maximalism in stark contrast to the industry’s dominant minimalism. With bold prints and a reinvented double-G logo, his “granny chic” styles helped take Gucci’s sales from just under €4 billion in 2015 to €9.7 billion ($10 billion) in 2015 to more than double in 2021. The operating margin rose to 38.2%. of 26.5% over the same period.

Kering’s shares have generated a total return of 20% per year during Michele’s tenure — double the MSCI World Textiles Apparel & Luxury Goods Index.

But the pandemic dealt a blow to Gucci from which he never really recovered. His boasting was at odds with the somber mood of the outburst. Young Chinese shoppers, who were among the brand’s biggest fans, seemed tired of it – when the country reopened in 2020, they rejected Gucci’s haute couture and instead indulged in classics like LVMH’s eponymous brand Moet Hennessy Louis Vuitton SE and Dior, as and Hermes International. Consequently, Gucci has left its competitors behind.

So far, Kering, assisted by Gucci Chief Executive Officer Marco Bizzarri, has helped Michele retake sales. It has invested in high-profile marketing campaigns, extravagant shows, more celebrity connections and collaborations with Palace, North Face, Adidas AG and sister house Balenciaga. More recently it has sought to update Gucci and complement Michele’s innovative designs with a more timeless look while emphasizing its heritage and craftsmanship.

But rejuvenating a luxury home is extremely difficult without a fresh creative vision. Michele had served a relatively long tenure for a top designer, and a move was increasingly likely, particularly after Kering scrambled Michele’s Gucci design team earlier this year.

This new chapter could reignite the excitement surrounding the brand. That’s perhaps why shares of Kering are up 2% in early trade on Wednesday before falling behind.

Given Gucci’s profile, Kering will be able to choose its candidates. It could opt for internal employment, as was the case with Michele, or it could be employed in its other houses. Alternatively, it could recruit from outside the group. A joker would be former creative director Tom Ford. After the $2.3 billion sale of his eponymous company to Estee Lauder Cos. Ford is expected to leave the cosmetics giant at the end of next year.

Michele’s successor should bring the brand to 15 billion euros in sales in the medium term and expand beyond fashion. That means expanding its range of leather goods, including travel accessories, evolving its menswear and moving into high-end jewelry. Hospitality is another option.

But the creative break is not without risks. Gucci is not broken. Its underlying sales rose 9% in the third quarter, and it remains the hottest brand in the Lyst Index, which measures online searches and social media engagement. Since it accounted for 55% of Kering’s sales and nearly three-quarters of its operating profit last year, the parent company will need to carefully manage the transition.

Realignment takes time and could be disruptive. Michele was pragmatic and included historical bestsellers in his collections. His successor must do the same to minimize the upheaval. In the meantime they will face a resurgent Prada SpA and a possible turnaround at Burberry Group Plc.

Fortunately, Kering is adept at identifying the right talent and backing it with significant resources. Look no further than, for example, how the company brought in Demna Gvasalia at Balenciaga and how it seamlessly managed Daniel Lee’s move to Matthieu Blazy at Bottega Veneta.

But given that Gucci is the engine of Kering’s fortune – and valuation – it has to be as creative in choosing the top designer as Michele was during his time at the brand.

More from the Bloomberg Opinion:

• Burberry uses its heritage to become a British LVMH: Andrea Felsted

• Black Friday’s blowout bargains smell musty this year: Andrea Felsted and Leticia Miranda

• Gambling’s Global Coming Out Party in Qatar: Lionel Laurent

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Andrea Felsted is a columnist for Bloomberg Opinion covering consumer goods and retail. She was previously a reporter for the Financial Times.

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