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Gucci’s new designer in focus as Kering plots future growth

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Gucci’s new designer in focus as Kering plots future growth

By Mimosa Spencer and Elisa Anzolin

PARIS/MILAN (Reuters) – Investors will be looking to see if Gucci’s new creative director Sabato de Sarno can move the needle on the company’s financial performance when its owner Kering reports full-year earnings on Thursday.

Gucci’s sales have lagged rivals such as LVMH-owned Louis Vuitton and Dior in recent years, prompting the company to change artistic direction through the appointment of De Sarno.

The 40 year old Italian, a relative unknown when he was appointed in January last year, has introduced more polished, toned down styles to the label in his first runway shows in September last year and January 2024.

The designer is already causing a stir. Singer Miley Cyrus wore a shimmery, brown sequined Gucci gown he designed while picking up one of her Grammy awards in Los Angeles on Sunday.

While Kering’s end-of-year financial figures will not reflect sales of De Sarno’s new looks – which only began to fill stores this year – the tone of the outlook from Kering executives will be closely eyed for clues on their potential success.

Gucci accounts for around two thirds of Kering’s operating profit and over half of its sales. Kering’s other labels include Yves Saint Laurent, Bottega Veneta and Balenciaga.

In the months preceding the designer’s Milan catwalk debut, Kering executives had laid the groundwork by pushing the label upmarket and emphasizing classic styles – like the Bamboo 1947 handbag, with its signature, curved handle.

“The recovery story of Gucci remains hard to gauge at this stage and any guidance around topline growth or margin outlook for [2024] will be particularly in focus,” said analysts at Barclays.

It is unlikely Gucci will have shown significant improvement, given the limited impact from the new designer, said analysts at RBC.

The group is expected to report an overall sales decline of 4.3%, according to RBC, with the Gucci brand expected to have fared marginally better, down 4.1% according to an estimate from HSBC.

Gucci’s brand overhaul is taking place as the sector comes down from a strong, post-pandemic rebound, with rising prices denting appetite for less wealthy shoppers.

The most resilient brands have proved to be those catering to the wealthiest such as Hermes and Richemont-owned Cartier.

The more affordable Burberry brand, which is attempting to move upmarket, issued a profit warning last month.

De Sarno, who previously worked behind the scenes at fashion house Valentino, has brought a down-to-earth approach to his high profile position, fashion experts say. His show notes have referred to “real life” and “simplicity”.

Analysts at Bernstein say the aesthetic shift, which they describe as “bon chic, bon genre” – preppy or posh – makes the collection “more commercial,” according to the analysts.

They expect more “originality” and point to the label’s faster growth rates under previous designers like Tom Ford.

De Sarno is unruffled by the criticism.

“I’m doing what I like and if what I like is a commercial thing, fine,” he said at an event in Milan earlier this week.

 

(Reporting by Mimosa Spencer and Elisa Anzolin; Editing by Christina Fincher)

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