Gucci’s new creative director, Sabato de Sarno, is facing intense scrutiny as Kering, the parent company of Gucci, prepares to release its full-year earnings report. Over the past few years, Gucci has lagged behind its competitors like Louis Vuitton and Dior, but with De Sarno at the helm, the luxury fashion brand aims to turn its financial performance around through a change in artistic direction.

De Sarno, a relatively unknown 40-year-old Italian designer before his appointment in January 2023, has already made an impact with his polished and toned-down styles showcased during Gucci’s runway shows in September and January. The singer Miley Cyrus even made headlines by wearing a sparkling Gucci gown designed by De Sarno while accepting a Grammy award.

While it may take time for De Sarno’s designs to reflect in Gucci’s year-end financial figures, industry experts will closely analyze the outlook provided by Kering executives for hints about their potential success. Gucci is a significant contributor to Kering’s operating profit and sales, along with other renowned brands like Yves Saint Laurent, Bottega Veneta, and Balenciaga.

Ahead of De Sarno’s debut on the Milan catwalk, Kering executives intentionally elevated Gucci’s positioning and focused on classic styles in an effort to revitalize the brand. The iconic Bamboo 1947 handbag with its curved handle was highlighted as a classic piece. However, analysts at Barclays note that the trajectory of Gucci’s recovery is still uncertain, making any guidance regarding growth or margins for 2024 crucial.

Some analysts, such as those at RBC, believe that De Sarno’s impact might be limited, leading to little improvement in Gucci’s performance. RBC estimates an overall sales decline of 4.3% for Kering, with Gucci expected to fare slightly better with a 4.1% decline, according to HSBC’s estimate.

Gucci’s brand transformation comes at a time when the fashion industry is experiencing a slowdown after a strong post-pandemic rebound. Rising prices have dampened the demand from less affluent consumers, while luxury brands catering to the wealthiest customers, such as Hermes and Cartier, have remained resilient. On the other hand, more affordable brands like Burberry, known for attempting to move upmarket, have recently issued profit warnings.

De Sarno, who previously worked behind the scenes at Valentino, has brought a down-to-earth approach to his high-profile position. Fashion experts note his emphasis on “real life” and “simplicity” in his show notes. Analysts at Bernstein describe the shift in aesthetic as “bon chic, bon genre,” referring to a preppy or posh style. They anticipate more originality in De Sarno’s designs and point to the faster growth rates Gucci experienced under previous designers like Tom Ford.

Despite the criticism, De Sarno remains unfazed and stays true to his vision. He confidently stated during an event in Milan, “I’m doing what I like, and if what I like is commercial, fine.” As investors anxiously await Kering’s full-year earnings report, all eyes are on Gucci’s new direction and whether De Sarno can steer the brand toward improved financial performance.

Useful links:
1. Business of Fashion: Gucci Struggles to Recover While Rivals Race Ahead
2. Vogue Business: Gucci’s New Creative Head is a Relatively Unknown 40-year-old Italian