Kering lost around $3 billion in stockmarket value on Friday after the group chose in-house talent Demna to reinvigorate its Gucci label rather than hiring one of fashion’s big-ticket names as chief designer.
Kering’s shares fell by up to 13% in Paris and posted their worst day in almost a year following the appointment of Balenciaga designer Demna. Kering’s shares closed down 11%.
Although widely praised for his streetstyle-inspired looks and attention-grabbing showmanship at Balenciaga, many analysts said 43-year-old Demna – who was born in Georgia and is known by one name – was a risky pick for much larger label Gucci with its reputation for timeless elegance.
The fashion world had been eagerly anticipating news of the new design chief at Gucci, which generates nearly half of Kering group sales and two-thirds of operating profit, after the brand fired Sabato de Sarno in February as sales of its handbags, loafers and dresses kept 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,” said Ariane Hayate, European Equity Fund Manager at investment bank Edmond de Rothschild.
Kering did not immediately reply to a Reuters request for comment.
“Some investors are wondering: “Who is driving the bus?”, Bernstein analyst Luca Solca said, citing a string of bad news at the group including expensive brand and real estate acquisitions, several profit warnings and now the upheaval around Gucci’s design chief.
Barclays analysts said choosing Demna rather than a famous external candidate like Hedi Slimane, Maria Grazia Chiuri or Pier Paolo Piccioli – three of the most-cited names by fashion watchers for the job – appeared as an attempt to make the label a global trend setter again.
Prolonged sales decline
Gucci’s prolonged sales decline, including a 24% drop in revenue in the fourth quarter of 2024 alone, has heavily weighed on Kering, with group shares down around 40% year-on-year while a European sector benchmark index was down only nearly 6% over the same period.
The group also recently lost Matthieu Blazy, its star designer at Bottega Veneta, who left to lead Chanel.
Sacking de Sarno was the first major decision under Gucci’s new chief executive, Stefano Cantino, who took over the helm in January.
De Sarno’s shift to minimalist and more timeless styles failed to gain traction with shoppers.
Kering executives said last month De Sarno helped the century-old label shift its focus back to more classic elegance, leaving a clean slate for his successor.
Demna now needs to redefine Gucci’s artistic direction and reinvigorate shoppers and retail buyers in Europe, the United States and China, which has been a struggle for the label since Alessandro Michele’s departure in 2022.
In China, where Gucci is highly exposed and suffered heavily from a recent slowdown in consumer spending, Demna’s appointment was met with mixed reaction.
“The appointment has generated significant media attention and digital buzz in China, but early indicators suggest a divergence between excitement and skepticism,” said Alexis Bonhomme, CEO of China-based luxury 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 main store 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 fact Demna is set to take over the helm only in July also 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 said.
Demna’s appointment was the latest reshuffle at the top of luxury fashion and came a day after Donatella Versace stepped down as Versace’s main designer, with Dario Vitale taking over. The industry’s slowdown has also triggered designer changes at other houses including Maison Margiela, Valentino, and LVMH-owned Fendi and Celine.
Demna grew up in Soviet-era Georgia and studied economics before migrating to Germany and then Belgium where he became a designer. He has mocked modern consumer culture, creating a Balenciaga bag that resembled one from IKEA, but sold for 2,000 euros ($2,180.20). He has also voiced support for Ukraine in its war against 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 also sparked a major backlash in 2022 over ad campaigns involving children, which he later said was the “wrong artistic choice.” Kering kept him in the role, where he carefully managed the brand’s exposure and ramped up sales.
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