Gucci is currently going through a makeover. Late on this Tuesday, the brand's owner, Kering revealed that Marco Bizzarri, its CEO, is resigning and that Jean-François Palus, the managing director of the French parent firm, will temporarily take over the brand's leadership in Milan. 60% of the company's EBITDA, worth 64 billion euros, was generated by the Italian fashion house last year. On Wednesday, Kering’s shares, which are listed in Paris, increased by 6%.
The real person of Bizzarri's permanent replacement at Gucci still remains unknown, although according to JPMorgan analysts, Roberto Eggs, the current director of strategy and global markets at Moncler, an Italian rival, is a candidate that investors are keen on. There will undoubtedly be too much for the new broom to handle. Compared to some of its mega-brand competitors, Gucci was struck more severely during the worldwide epidemic and had a difficult time recovering. According to forecasts from analysts compiled by Visible Alpha, revenue would only expand by a modest 1.5% in 2023. That is far less than the 15% and 10% increases for Christian Dior and Louis Vuitton, respectively, that traders have estimated. While Kering's shares are trading at 17 times the current year's earnings, LVMH has a multiple of 30.
The major difficulty for Gucci will be figuring out a way to depend less on China, which accounts for over a third of the sales compared to approximately a quarter for competitors Hermès International, based on Barclays' estimates. Due to protracted lockdowns caused by pandemics and a slow recovery in the People's Republic, this dependence used to be beneficial but is starting to appear as a problem. There are, however, not many potential alternatives in the future. According to Bain & Company, the number of middle- and high-income Indians would expand by up to 40 million between 2022 and 2030; nevertheless, this is only a fifth of the rise that China achieved between 2014 and 2022. Due to all of these, the CEO position at Gucci is among the most exciting in the luxury industry, yet it may also be the most difficult one.