Kering lost its stock market value of around $3 billion on Friday after the group chose internal talent Demna to reinvigorate internal talent Demna rather than hiring one of the fashion big ticket names as chief designers.
Kering's shares fell by up to 13% in Paris, marking the worst day in almost a year after the appointment of Balenciaga designer Demna. Kering's shares fell 11%.
Though widely praised for his street style-inspired looks and high-profile showmanship in Balenciaga, many analysts said Demna, 43, born in Georgia and known by one name, is a risky pick from Gucci, a much larger label with a reputation for timeless elegance.
The fashion world was enthusiastically anticipating the news of Gucci's new design chief. This generated almost half of Kaeling Group's sales and two-thirds of operating profit after the brand fired Sabato de Sarno in February as sales of calves, loafers and dresses continued to slip.
“This internal solution may seem to have been taken because there is no better option, but it is also a bold move given Baranciaga's success. Arian Hayate, European equity fund manager at investment bank Edmund de Rothschild, said:
Kering did not immediately reply to Reuters' request for comment.
“Some investors are wondering, 'Who is driving the bus?' Bernstein analyst Luca Solca said, citing a series of bad news in the group, including expensive brand and real estate acquisitions, some profit warnings, and now the tumultuous change regarding Gucci's design chief.
Barclays analysts said they would choose Demna rather than famous outside candidates such as Hedy Sliman, Maria Grazia Chiuli and Pier Paolo Piccioli.
Long-term sales decline
Gucci's long-term sales decline, including a 24% decline in revenue in the fourth quarter of 2024 alone, weighed significantly at Kering, with group share dropping by about 40% year-on-year, while the benchmark index for the European sector only fell by nearly 6% over the same period.
The group recently lost Matie Blasey, the star designer of Bottega Veneta, who left to lead Chanel.
Sacking de Sarno was the first major decision under Gucci's new CEO Stefano Cantino, who took over the helm in January.
De Sarno's minimalist and shifting to a more timeless style did not gain traction with shoppers.
Kering executives said last month that De Sarno helped the century label return its focus to more classic elegance and leave a clean slate for its successor.
Demna now needs to redefine Gucci's artistic orientation and reinvigorate shoppers and retail buyers in Europe, the US and China.
In China, where Gucci is very exposed and suffers deeply from the recent slowdown in consumer spending, Demna's appointment has been met with a complicated response.
“This appointment has created a major media attention and digital buzz in China, but early indicators suggest a difference between excitement and skepticism,” says Alexis Bonhomme, CEO of China-based luxury consulting firm Trinity Asia.
“Dem's hype-driven streetwear-centric playbook has made Balenciaga a Chinese feel, but Gucci's wider audience and deeper legacy require a more refined approach,” he added.
Shopper Elena Kucci was confused at Gucci's main store in Milan. “Why do they make this change and put this new designer on me and it seems a little up there.”
The fact that Demna is set to take over the helm only in July has also raised doubts.
“It's unclear whether Gucci's September Milan fashion show will already reveal his imprint on the brand. Or whether he will have to wait until 2026,” Jeffries analysts said.
Dem's appointment was the latest remodel at the top of luxury fashion, and came the next day Donatera Versace resigns Dario Vitale is taking over as the main designer of Versace. The slowdown in the industry has also led to changes in designers in other homes, including Fendi and Celine, owned by Maison Margiela, Valentino and LVMH.
Demna grew up in Soviet Georgia, moved to Germany, then to Belgium, where she studied economics, becoming a designer. He laughed at modern consumer culture and created a Balenciaga bag similar to IKEA's but sold for 2,000 euros ($2,180.20). He has also expressed his support for Ukraine in the war with Russia.
“I read this news,” Demna was quoted as saying by the New Yorker in her 2023 portrait. “You can't cut off from reality.”
In Balenciaga, Demna sparked a major backlash in 2022 over a child-involved advertising campaign. Kering kept him in that role, where he carefully managed the brand's exposure and increased sales.
