Kering: Demna's arrival at Gucci shunned by stockmarket

(CercleFinance.com) - Kering shares fell sharply on Friday, the day after it was announced that Demna, the current artistic director of Balenciaga, would take over as creative director of its troubled Gucci brand.


The stock is currently down over 12%, posting by far the biggest drop in the CAC 40 index and the STOXX Europe 600.

Artistic director of Balenciaga since 2015, Demna has redefined the codes of luxury, achieved worldwide recognition and asserted his influence in fashion, Kering said in a statement.

What Demna has brought to fashion, to Balenciaga and to the group's success is immense, CEO François-Henri Pinault said.

His creative strength is exactly what Gucci needs, the Kering boss added.

Analysts' reaction to this appointment was, however, much more measured.

We would have hoped for an undisputed designer at Gucci, TP ICAP Midcap reacted, citing, amongst others, the names of Kim Jones or John Galliano.

Rumours also suggested the possible arrival of Maria Grazia Chiuri, the artistic director of Dior's women's collections, or Hedi Slimane, who has just left Celine.

RBC also admits that investors were hoping for an external, but also more renowned candidate.

We recognize Demna's success at Balenciaga, but we fear that this appointment at Gucci will not be sufficient to meet the expectations of both consumers and investors, the Canadian broker judges.

We believe that the market was expecting a strong external candidate, capable of leading and influencing with fresh perspectives and ideas to revitalize the Gucci brand, it adds.

RBC is also concerned about the consequences of his departure from Balenciaga, as Kering has yet to announce the name of his replacement at the head of its subsidiary, which he believes could lead to some disruption in the short term.

In his new role, Demna's mission will be to stabilize and even accelerate the brand's commercial momentum, particularly in the key leather goods and handbag category.

Analysts at Oddo BHF hail the choice as "rather disruptive", but question whether the appointment of a new designer will enable the brand to make a fresh start.

We were in favor of a real new start for Gucci, with a certain amount of stylistic rupture, the broker says.

The choice of Demna may seem to be a step in this direction, but it still has to work within the framework already set, Oddo adds.

According to the private bank, the new artistic director's first collections, expected by the end of the year, will be particularly closely watched.


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