Gucci is a hit with celebrities, but its sales show limited demand. Photo: Alberto Pezzali/Invision/AP
As a stream of A-listers took their seats in the basement of Tate Modern earlier this week for Gucci's latest cruise collection, executives looked relaxed.
Sitting next to his wife Salma Hayek, Francois-Henri Pinault, chief executive of Gucci owner Kering, “beamed with confidence,” The Telegraph's fashion chief Lisa Armstrong wrote after the show.
Another 600 Pinault and Gucci guests, including Debbie Harry, Demi Moore and Dua Lipa, gathered to see the latest collection by Sabato De Sarno, the luxury brand's new creative director, at his first show outside Milan.
After years of declining Gucci sales, De Sarno is unable to win back customers.
Last year, Kering reported that Gucci's revenue fell a further 6% to €9.9bn (£8.5bn). The company recently said it expects profits across its entire business to fall 45% in the first six months of the year, placing the lion's share of the blame on Gucci.
The poor performance is increasingly causing disappointment among investors who see the value of the Pinault empire crumbling.
Kering shares are down 57% from their peak in August 2021, giving the company a market value of €41 billion. For Pinault, it's a bitter pill to swallow after Kering's biggest rival LVMH had a record year in 2023, increasing its valuation to nearly 398 billion euros and falling behind only Novo Nordisk, maker of the diabetes drug Ozempic, which also uses the label for weight loss.
Pino once said that Gucci could eventually have “the same potential as Louis Vuitton.” His reasoning? “Why not?”
However, six years after these comments were made, such confidence seems misplaced. Some investors are even beginning to wonder whether Pinault should consider passing the baton to his luxury empire and bringing in fresh blood.
“Kering's results were lackluster,” says Neil Saunders of GlobalData. “As the latest quarterly data shows, there is little sign of improvement on the horizon. It does raise the question of whether new leadership is needed.”
Pino inherited the luxury empire two decades ago after his father retired at age 64.
Today, at the age of 60, Pinault is chairman and chief executive of Kering, as well as president of its parent company Groupe Artémis.
Together, the Pinault family owns 42 percent of Kering shares and controls 59 percent of its voting rights.
Pinault , pictured next to Salma Hayek, his wife, at the Gucci cruise show. Photo: Noorunisa/WWD via Getty Images)
Although Pinault was adamant that he was not grooming his children to succeed him, he decided last month to bring the next generation into the fold. folded, appointing his 26-year-old son as director of the board of directors of Christie's auction house.
The younger Pinault, who began his career with an internship at Boucheron, the jewelry business owned by Kering, and who is also named Francois, replaced his grandfather and Kering founder on the Christie's board of directors. He is the eldest of Pinault's four children. He has been considered the natural heir for some time, appearing alongside his father and grandfather in 2016 when they announced the creation of the Merchant Exchange in 2016.
Experts say he is still too young for the top job, but his appointment at Christie's was seen as the first step in his ascension.
Insiders say problems within the luxury goods conglomerate stem from the way dozens of brands in the Kering empire are managed.
“The Pinault family was very removed from the day-to-day running of the brands,” says one former executive. “All the leaders of the various Kering brands have extraordinary freedom of action.” This is in stark contrast to LVMH, which, according to a former director, is “permanently controlled by the Arnault family and its immediate proxies.”
Some observers argue that this hands-off approach has led to a lack of focus at many of Kering's brands – not least Gucci, which has suffered from a series of design and management changes.
In 2014, Pinault said that Gucci's focus on quantity rather than quality “would be the biggest danger for the brand.”
However, just a few years later, Gucci tried to increase sales by targeting younger and more ambitious buyers in the US and China, which experts say undermined the brand's exclusivity.
This comes amid leadership turmoil following the departure of star designer Alessandro Michele in 2022.
“Investors were confused before the replacement was announced,” says HSBC's Erwan Rambourg. De Sarno was appointed as the new creative director last year.
The Cruise Collection show was De Sarno's first show outside of Milan. Photo: Henry Nicholls/AFP
The shake-up went even further last year when Marco Bizzarri, then CEO of Gucci, announced his departure after eight years. Counting specialist Jean-François Palus was appointed as a temporary replacement. He has since held the position permanently.
Ramburg says this approach to brand succession planning does not exist at rival LVMH. “At LVMH, the CEO of each brand has several possible replacements, and this is reflected every time you hear about changes,” he says.
There are early signs that Pinault is aware of this: Insiders say they believe the family has taken steps to “try to be more involved in each brand's strategies and positioning.”
However, critics say the recent moves instead indicate that Pinault is planning to change the way Kering is run and is even potentially considering a different type of succession.
In last year's leadership shake-up, Francesca Bellettini, Yves Saint Laurent chief executive and rising star, was appointed to the new role of deputy chief executive of Kering, tasked with reinvigorating its brands.
Bellettini was appointed to this position with the aim of activating the Kering brands. Photo: AFP/Ludovic Marin
It follows years of investors pressing Pinault to consider bringing senior executives into the fray. “It would be positive if Kering had professional management,” says one shareholder. They suggest the business could prosper if Pino stepped aside and gave up the CEO role.
Some see Bellettini's promotion as the first step towards Pino splitting the top job into two roles. “One can imagine a time when he retains his role as chairman and hands over the group CEO position to a luxury heavyweight inside or outside,” Rumburg says.
As Pino approaches the age where his father will inherit the mantle, the focus on who will replace him intensifies. For the elder Pinault, time was of the essence. “I felt he was getting nervous and I didn’t want to submit to him too late,” the Kering founder said.
Hours before models hit the runway at the Gucci show on Monday, Hayek shared an Instagram post with the caption: “The calm before the cruise.”
As investors get restless, Pinault will have to act quickly before their nerves get out of control and cause a storm.
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