New Gucci designer has big sneakers to fill

A model presents a creation from the Gucci Autumn/Winter 2018 women collection during Milan Fashion Week in Milan
A model presents a creation from the Gucci Autumn/Winter 2018 women collection during Milan Fashion Week in Milan, Italy February 21, 2018. Picture taken February 21, 2018. REUTERS/Alessandro Garofalo

MILAN, Jan 30 (Reuters Breakingviews) - Gucci’s new creative head Sabato De Sarno is stepping onto a wobbly catwalk. François-Henri Pinault’s conglomerate Kering (PRTP.PA) on Saturday picked the 39-year-old from smaller fashion house Valentino to lead its biggest brand and succeed star designer Alessandro Michele, who left abruptly in November. Michele’s daring designs, which he applied lavishly on anything from shirts to sneakers, helped Gucci sales shoot up to nearly 10 billion euros in 2019. But at around 10.5 billion euros in 2022, Gucci sales are expected to have risen only 10% since then. Meanwhile sales at LVMH-owned (LVMH.PA) rival Louis Vuitton rose almost 60% to about 20 billion euros and nearly trebled at now similarly-sized Dior, according to Breakingviews calculations on estimates from Jefferies and HSBC.

Investors will have to wait to figure out whether De Sarno, a relatively lower-profile industry figure, can revive Gucci to its former glory and bolster 69 billion euro Kering’s depressed valuation. Michele, who was similarly unheralded when he emerged from Gucci’s inner ranks in 2015, was able to create his first collection in just five days. De Sarno’s debut collection isn’t due until September.

The Gucci brand remains desirable. It was the most searched on social media and shopping apps in the quarter to September, according to fashion technology company Lyst. If De Sarno can temper some of Michele’s fashion excesses while keeping Gucci exciting, the 33% discount at which Kering trades relative to rival LVMH on an expected earnings multiple basis could yet shrink. (By Lisa Jucca)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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