Shares of Kering, the luxury group behind Gucci, saw a steep decline on Friday morning, dropping nearly 10% following the announcement of Demna Gvasalia as the new artistic director of the beleaguered fashion house. This move, described as both surprising and controversial, reflects Kering's urgent need for reinvigoration amid dwindling sales and financial pressure.
Demna, recognized simply as Demna, will take the helm at Gucci starting July 2025, stepping in following the dismissal of Italian designer Sabato De Sarno, who left after only two years. This sudden leadership change is pivotal as Gucci, once celebrated as one of the industry's leading brands, has experienced significant revenue challenges. Most recently, the label reported a staggering 24% drop in revenues during the fourth quarter of 2024, putting immense pressure on Kering to stabilize and revitalize its flagship brand.
Upon his appointment, Demna replaces De Sarno, whose tenure was cut short amid concerns over Gucci's direction. Kering's chairman and CEO, François-Henri Pinault, expressed confidence in Demna, stating, "His creative power is exactly what Gucci needs." Pinault’s endorsement is indicative of the group's strategy to leverage homegrown talent rather than seeking external figures from the hyper-competitive fashion market.
The news of Demna’s appointment had immediate repercussions on the stock market, with Kering shares plummeting more than 12% at one point, erasing approximately 3 billion euros, or $3.25 billion, from the company's market capitalization. This drop marks the largest single-day decline for Kering since October 2008, underscoring investor concern over whether Demna can drive the necessary turnaround at Gucci.
Industry analysts have voiced mixed reactions to the new appointment. Analysts at J.P. Morgan labeled the decision as "controversial," noting the early backlash on social media and fashion blogs, which reflects uncertainty about Demna's ability to evolve Gucci's brand identity effectively. The change is seen as Kering's last-ditch effort as sales continue to lag significantly behind competitors.
Although Demna has received acclaim for his transformative influence at Balenciaga, where he served as artistic director since 2015, his controversial ad campaigns have sparked criticism. Among his most questioned decisions was the 2022 Balenciaga campaign featuring disturbing imagery involving children, which Demna later termed as the "wrong artistic choice." He has publicly apologized for the fallout, but opinions on his suitability for the Gucci role remain divided.
Gucci, which generates nearly half of Kering's total sales and approximately two-thirds of its operating profits, is at the center of the group's strategy to drive revenue growth. Yet, recent indicators suggest challenges persist, evidenced by Kering's overall 12% sales decrease reported last month. With Gucci's struggling brand image and revenues hitting historic lows, the pressure for Demna to deliver results is mounting.
Looking to the future, analysts are wary of whether Demna can inject the fresh energy the brand desperately needs before key product presentations. Jefferies analysts have pointed out the tight timeline, expressing skepticism about whether any change would be noticeable during Gucci's upcoming fall 2026 collections, scheduled for their Milan fashion show.
Demna's first significant collection at Gucci will debut heavily under scrutiny, as the industry watches to see if his unique approach to luxury can shift the aesthetic and commercial direction of the brand. His track record at Balenciaga, marked by both avant-garde innovation and provocative fashion, will be matched against the established elegance and quality associated with Gucci.
Financially, Kering's performance will continue under the microscope as the firm navigates significant transformations in consumer preferences, particularly amid slow demand from key markets such as China where luxurious spending has dipped. Kering's shares have tumbled around 40% year-on-year, contrasted with luxury competitors showing resilience amid market volatility.
Demna's arrival at Gucci may represent not only the next stage for him personal but could also mark what many hope to be "a new chapter of Gucci's amazing story." His controversial design philosophy, along with the brand’s need for revitalization, sets the stage for what could be one of the most transformative periods Gucci has faced.