The Onetime Auditor Brought In to Reinvent Gucci

The Onetime Auditor Brought In to Reinvent Gucci
The Onetime Auditor Brought In to Reinvent Gucci

Summary

The new CEO is making the trendsetting label more understated, and trying to learn Italian, too.

MILAN—When Gucci’s flagship store here reopened last month, the space was missing the baroque flourishes and jewel-toned colors that have defined the brand in recent years.

Instead the look is decidedly less maximalist—all clean lines and understated tones.

The restrained renovation is part of a dramatic makeover by the once-florid brand aimed at reaching older and more conservative customers. Or, to put it another way, richer ones.

After several years of slowing growth, Gucci is trying a reset. In an effort to close the gap with its luxury rivals, the brand that long striven to be at the cutting edge of fashion is trying to go more upmarket. The shifts mean Gucci could risk becoming just another expensive brand that has lost touch with the attributes that made it great. If the plan works, Gucci will join the small group of megabrands that seem to mint money whatever the ups and downs of the world economy.

“Gucci had come to the end of a chapter, and was about to open a new one. We decided to really open a completely fresh one," said the brand’s new CEO Jean-Francois Palus. “It’s about taking this opportunity to do new things. A fresh eye. A new mindset. A new approach. New leadership."

Palus embodies the severity of the changes: A Frenchman at the head of a company that is as Italian as Chianti, he isn’t yet fluent in the native language, nor does he have a creative background.

Palus, 62 years old, was chosen by Francois-Henri Pinault, the CEO and chairman of the brand’s parent company, Kering, to reinvent Gucci as a steadier, more dependable brand less vulnerable to shifts in the fashion cycle. It is an approach that aims to bring its strategy closer to some of its biggest rivals, including Louis Vuitton, Chanel and Hermès.

By comparison, sales at these brands are heavily driven by a small number of staples, which remain on store shelves well beyond abbreviated fashion seasons. While they employ influential creative directors for their collections—notably, the superstar music producer Pharrell Williams at Louis Vuitton—they don’t center their entire creative vision around a single person. No matter what goes down the runway, shoppers can find their stalwart handbag styles and luxury essentials in its stores.

Gucci is similarly striving to make itself a little less available, reducing its overall product range by 20% in recent months and cutting its distribution network.

Perhaps nothing reflects the reset for the 102-year-old brand more than the elevation of Palus to the role of CEO in July. He began his career as an auditor and financial adviser with Arthur Andersen. He then ran the books for the timber division of the conglomerate that would go on to become Kering, which today includes brands like Saint Laurent and Balenciaga as well as Gucci.

Palus was originally put in the job for a transitional period. Executives have since said he is likely to stay on for at least two or three years.

To bolster his Italian, the Frenchman is taking language lessons twice a week, as well as reading local children’s books.

The perks of his new job have also taken some getting used to. When Palus’s assistant tries to make a reservation at Milanese restaurants for him, she sometimes gets turned down because maitre d’s don’t know the name. When she points out that Palus is the CEO of Gucci, tables instantly open up.

As part of the reset, Palus has redirected much of its marketing spending away from digital and toward glossy magazines and outdoor billboards—a radical shift after its growth in previous years was fueled by social media. On Instagram, the brand now posts meticulously curated photos six or seven times a week, whereas it would previously post several times a day.

Having started in leather goods more than a century ago, Gucci is tapping into its history with modern takes on classics: the Bamboo bag, first created in the 1940s, the horsebit loafers from the 1950s and the crescent-shaped Jackie bags, named after Jacqueline Kennedy, which debuted in 1961.

“It’s more about thinking about the next 20 years, rather than mourning the five last years," Palus said.

Palus has taken the reins as Gucci pilots itself through a complete creative overhaul. Just before the regime change, Sabato De Sarno, a little known designer hired away from Valentino, took control of Gucci’s creative team. He is the brand’s first external hire for the role in Gucci history.

“Gucci thrives when over the top," said Bernstein analyst Luca Solca. The “shift to classic makes the collection potentially more commercial, but it also pitches Gucci against more credible incumbents" such as Chanel and Hermès.

The conditions for Gucci’s transformation are precarious, as people have pared back their spending on luxury goods over the past year amid economic uncertainty and higher inflation. Younger consumers, who have traditionally made up a large chunk of Gucci’s sales, have pulled back the most.

Making matters worse, Gucci had already missed out on the bonanza that fattened the accounts of fellow luxury labels during the pandemic. Wealthy shoppers, many stuck at home, accumulated cash to spend and had more time to spend it.

In 2022, LVMH, Gucci’s weightiest competitor, saw sales in its fashion and leather goods division, which includes brands like Louis Vuitton and Christian Dior, soar to 74% above 2019’s figures.

In the same window, Gucci’s sales only ticked up by 9%. In the third quarter of this year, Gucci’s sales dropped 14%.

Gucci first embraced cutting-edge styles in the 1990s, when designs like its slim-cut tuxedos in luxurious fabrics made the brand a darling to critics. But the strategy exposed the brand to the fickle tastes of the fashion crowd, and it was thin on trend-agnostic pieces that consumers could reliably buy season after season.

Sales soared under American designer Tom Ford in the 1990s and early 2000s. But by 2014, Gucci’s shine had dulled to such an extent that U.S. department store Bergdorf Goodman no longer wanted to stock it.

Gucci roared back under Italian designer Alessandro Michele after he was promoted to the top creative role in 2015. More recently, as shoppers have grown weary of Michele’s gender-blurring, rococo vision, Gucci has dragged down the fortunes of Kering, where it makes up more than half of sales and two-thirds of core profit. The conglomerate is trading today at a 25% discount to many of its peers as a multiple of expected earnings.

While it continues to court younger buyers with ornate pieces, the brand is also trying to better reach other clients who want to buy clothes or accessories that are more timeless. Gucci has traditionally done well in handbags priced between $1,500 and $2,500, but is now working to improve its offerings in higher price points.

In its newly reopened boutique, Gucci is highlighting its recently released Jackie Notte handbag, a product inspired by the classic Jackie bag. The Jackie Notte leather is more sophisticated. The lining fabric is more luxurious. There is more gold. The stitching is thinner and less noticeable.

In ready to wear, Gucci is focusing more on evening dresses. Superstar Taylor Swift on Sunday attended the Golden Globes in a floor-length, green Gucci gown.

Gucci has also opened a series of high-end salons for the ultra wealthy where nothing costs less than $40,000—and some pieces can cost as much as $3 million.

De Sarno hasn’t hesitated to dispense with the brand’s recent aesthetic. The first ad campaign under his stewardship, which the brand first teased on Instagram in August, showed 40-year-old model Daria Werbowy stripped back in nothing but gold jewelry and a black bikini—a stark contrast to the ornate images of Michele’s era.

The blueprint for the freshly renovated Milan store will be rolled out to around 20 other Gucci stores over the next year and a half, but it is a transitional architectural design that was developed in a matter of weeks. Gucci is working to hire an architecture firm that will come up with a more long-term vision for its stores, which will then start to be rolled out in the second half of 2025.

At De Sarno’s first show in September, Kering chief Pinault tried to manage expectations, saying De Sarno’s second or third show would likely be more important. The new creative chief’s second show will be held in Milan on Jan. 12.

“The climax shouldn’t come too soon," said Pinault, adding that De Sarno hadn’t tried to put everything in the first collection. “That would anyway be a mistake," the billionaire said.

Models walked the runway in streamlined silhouettes with a monochrome palette. Gone were his predecessor’s lavish green decorative pattern and fur lined loafers.

The show drew mixed reactions, with the company touting its success but at least one bank downgraded the stock. Palus was unmoved by the reception. “Everything that we are doing right now, we are building for the long term," he said.

Write to Nick Kostov at nick.kostov@dowjones.com

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
more

MINT SPECIALS