In what’s quickly becoming the true Gucci fashion, sales for the retailer dropped 25% YoY, as part of the broader decline in Kering’s Q2 revenue.
The numbers are hardly shocking for two primary reasons: Luxury is in a very obvious slump with many major retailers struggling, and Gucci has been at the forefront of this struggle with disappointing results quarter after quarter.
Bret Bero, assistant professor of practice in management at Babson College, calls it a “revenue challenge.”
“There may be other things that they need to fix and turn around, but when you have that greater revenue decline, the clock starts ticking,” he told Retail Brew.
He added that the brand’s biggest challenge over the years has been the loss of its core customers as it went through a series of different creative directors each with their own vision.
“They’ve moved obviously, through the eras having different customers, and that’s fine, because each generation pursues something different,” Bero said. “But going from Tom Ford to Alessandro with his androgynous look, I’m not sure what the core selling proposition is right now if I am one of the older customers who grew up from the Tom Ford era and some of the more classic definitions of what Gucci means.”
To Gucci’s credit, it’s possibly why the retailer brought in Demna earlier this year. The former creative director of Balenciaga is known for his statement-making looks and his signature designs, which is exactly what Gucci might need to reestablish a strong identity and redefine its core customer.
“He may fail, but I would rather take a shot with somebody who’s got a defined image and message,” Bero said.
Michael Prendergast, luxury expert at Alvarez & Marsal’s consumer and retail group, agreed, adding that for Demna’s vision to work, it has to be a “perfect alignment of the stars” as he’ll need to understand what makes Gucci tick and what are the brand’s core attributes that can work with its audience in the long term.
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“It's not enough just to have a cult following,” he said. “You have to truly understand and have almost sort of a brand whisperer creative mindset to truly understand what makes the brand successful.”
Both Prendergast and Bero, however, are confident in Luca de Meo, the new CEO of Kering. While he does not have a luxury fashion background, he does have a strong reputation for turning things around, like he did as CEO of Renault.
“He is the sort of guy that is driven to get results and builds teams to do that,” Bero said.
Meanwhile, Prendergast called de Meo an “operational guru” who will likely be able to balance growth, innovation, assortment selections, and investment of inventory in the “right product” alongside tackling financial and operational challenges.
But whether it’s Demna or de Meo, we’re likely not going to see the real impact of these executive changes for the next 6–12 months. Until then, it’s pretty much a waiting game. Add tariffs to the mix, and things only get murkier.
“Prices are elevated, consumer sentiment and demand drop—what’s going to happen then?” Prendergast said. “That will be right around the time where they need to get traction in their turnaround, and when they can have new product on the floor and new operational efficiencies. So it is a very challenging time for them to be entering or have started a transformational turnaround.”