Things are not going well for the Gucci company
It’s not easy to turn around a company that’s having problems, especially when owners are putting pressure on you. Kering, the French luxury conglomerate, dropped a bombshell not long ago when it said that sales of its main brand Gucci had dropped by an unbelievable 20% in the last quarter. What do you think? The market did not take it lightly, as shown by the 14% drop in the price of Kering’s shares. Unfortunately, this sudden turn of events happened just one month before the company reported its earnings. This means that Gucci’s change may be harder to handle than was first thought. Now, everyone is talking about Jean-Francois Palus, who is the new CEO of Gucci.
What China has to deal with
Take a look at this: China is thought to be the holy grail of luxury markets, but there isn’t much of the Gucci image there. According to a study by Bank of America, Chinese consumers would rather spend their money on trips around the world and high-end restaurants than on expensive shoes and bags. What this means for Gucci is that it will have a hard time because a lot of its money used to come from young, stylish Asians. The Gucci brand is having a rough time in the Chinese market and needs to do some deep thinking about it.
Changing the way fashion works and the drama of designers
This update by Gucci isn’t just meant to win over the Chinese market; it’s also meant to completely change the way the brand dresses. Now is the time to say goodbye to Alessandro Michele’s fancy works and hello to Sabato De Sarno’s more classic ones. But there is a catch: De Sarno’s new line is still being tried out in a few stores. There is truth to Kering’s claim that people like it, but it is still too early to tell if this change from Gucci’s usual wild style will work. Palus might have to wait for now when it comes to De Sarno’s plan.
A Act of Balance in Finance
Gucci’s current cash situation, on the other hand, is not exactly singing beautiful tunes. Money can really drive you. Kering has been spending a lot of money, buying names like Creed and shares in many companies, such as Valentino. This has made Kering’s balance sheet feel a little stretched out, even though it might sound like a flex. Along with that, the cash flow is being used to buy things, so there isn’t much left over for buying back shares, which would have helped buyers feel better. It looks like Palus will have to get creative with the money he has access to.
Putting Palus in the driver’s seat
At this point, everyone is counting on Jean-Francois Palus, who has been given the job of steering Gucci out of problematic waters. At first, Palus wasn’t supposed to be CEO forever; he was just meant to fill in for Marco Bizzarri, who had been in charge. Investors were keeping a close eye on Francesca Bellettini for the top seat because she was in charge of Yves Saint Laurent’s growth. She has been given the title of deputy CEO at Kering, which comes as a total surprise. Because of this, Palus needs to work his magic and bring Gucci back to the heights of its glory.
Finally, the path that lies ahead
There is no question that Gucci has a lot of work to do. There will be a lot of hurdles along the way, such as getting the Chinese crowd to come back and updating the style while staying within budget. Despite this, there is hope that Gucci will be able to weather the storm and come out on top, since Palus is in charge of running the company. Time is the only thing that will tell if this luxury giant can get back its swagger.