Kering misplaced round $3 billion in stockmarket worth on Friday after the group selected in-house expertise Demna to reinvigorate its Gucci label somewhat than hiring one in all trend’s big-ticket names as chief designer.
Kering’s shares fell by as much as 13% in Paris and posted their worst day in nearly a yr following the appointment of Balenciaga designer Demna. Kering’s shares closed down 11%.
Though extensively praised for his streetstyle-inspired seems and attention-grabbing showmanship at Balenciaga, many analysts mentioned 43-year-old Demna – who was born in Georgia and is understood by one identify – was a dangerous choose for a lot bigger label Gucci with its popularity for timeless class.
The style world had been eagerly anticipating information of the brand new design chief at Gucci, which generates almost half of Kering group gross sales and two-thirds of working revenue, after the model fired Sabato de Sarno in February as gross sales of its purses, loafers and clothes saved sliding.
“This in-house solution might appear to have been taken in lack of better options, but is also a bold move given Balanciaga’s success. Time will tell,” mentioned Ariane Hayate, European Fairness Fund Supervisor at funding financial institution Edmond de Rothschild.
Kering didn’t instantly reply to a Reuters request for remark.
“Some investors are wondering: “Who is driving the bus?”, Bernstein analyst Luca Solca mentioned, citing a string of unhealthy information on the group together with costly model and actual property acquisitions, a number of revenue warnings and now the upheaval round Gucci’s design chief.
Barclays analysts mentioned selecting Demna somewhat than a well-known exterior candidate like Hedi Slimane, Maria Grazia Chiuri or Pier Paolo Piccioli – three of the most-cited names by trend watchers for the job – appeared as an try and make the label a worldwide development setter once more.
Extended gross sales decline
Gucci’s extended gross sales decline, together with a 24% drop in income within the fourth quarter of 2024 alone, has closely weighed on Kering, with group shares down round 40% year-on-year whereas a European sector benchmark index was down solely almost 6% over the identical interval.
The group additionally not too long ago misplaced Matthieu Blazy, its star designer at Bottega Veneta, who left to guide Chanel.
Sacking de Sarno was the primary main determination below Gucci’s new chief govt, Stefano Cantino, who took over the helm in January.
De Sarno’s shift to minimalist and extra timeless types failed to achieve traction with buyers.
Kering executives mentioned final month De Sarno helped the century-old label shift its focus again to extra basic class, leaving a clear slate for his successor.
Demna now must redefine Gucci’s creative course and reinvigorate buyers and retail consumers in Europe, america and China, which has been a battle for the label since Alessandro Michele’s departure in 2022.
In China, the place Gucci is extremely uncovered and suffered closely from a current slowdown in shopper spending, Demna’s appointment was met with combined response.
“The appointment has generated significant media attention and digital buzz in China, but early indicators suggest a divergence between excitement and skepticism,” mentioned Alexis Bonhomme, CEO of China-based luxurious consultancy Trinity Asia.
“Demna’s hype-driven, streetwear-centric playbook made Balenciaga a sensation in China, but Gucci’s broader audience and deeper heritage necessitate a more refined approach,” he added.
At Gucci’s fundamental retailer in Milan, shopper Elena Cucchi was puzzled. “I don’t understand why they made this change and put in this new designer who to me, seems a bit over the top.”
The actual fact Demna is about to take over the helm solely in July additionally raised questions.
“It is unclear whether his imprint on the brand will already be evident at Gucci’s September Milan fashion show. Or whether we will have to wait until 2026,” Jeffries analysts mentioned.
Demna’s appointment was the most recent reshuffle on the high of luxurious trend and got here a day after Donatella Versace stepped down as Versace’s fundamental designer, with Dario Vitale taking on. The business’s slowdown has additionally triggered designer adjustments at different homes together with Maison Margiela, Valentino, and LVMH-owned Fendi and Celine.
Demna grew up in Soviet-era Georgia and studied economics earlier than migrating to Germany after which Belgium the place he grew to become a designer. He has mocked trendy shopper tradition, making a Balenciaga bag that resembled one from IKEA, however bought for two,000 euros ($2,180.20). He has additionally voiced assist for Ukraine in its struggle in opposition to Russia.
“I read the news,” Demna was quoted as saying by the New Yorker in a 2023 portrait. “I can’t disconnect from reality.”
At Balenciaga, Demna had additionally sparked a serious backlash in 2022 over advert campaigns involving kids, which he later mentioned was the “wrong artistic choice.” Kering saved him within the function, the place he rigorously managed the model’s publicity and ramped up gross sales.
