Why New Gucci CEO Stefano Cantino Faces China Crisis
Incoming Gucci boss Stefano Cantino will have to figure out what to do about plummeting sales in China once he becomes CEO in January.
Cantino, who only joined Gucci in May as Deputy CEO, takes over from Jean-François Palus as CEO on 1 January 2025. Palus himself only became CEO of Gucci in summer 2023.
Asia Pacific has been particularly problematic this quarter for Gucci - the largest in-house fashion brand for its parent company, Kering, accounting for almost half of revenues and two-thirds of operating profit.
Overall, Gucci’s revenue dropped by 26% in the third quarter from €2.2bn to €1.6bn.
Asia Pacific accounted for about one third of Gucci’s global revenue this quarter, slightly down from last year, when almost 40% of Gucci’s revenues came from APAC. This makes it the largest regional market for the brand.
Kering has been overhauling the century-old Italian fashion house, rebuilding senior executive teams and introducing a new streamlined design style under the artistic direction of Sabato de Sarno, while pushing its products upmarket.
The group said that the overhaul of Gucci's leather goods category, with the introduction of a host of new products late in the quarter, was well underway.
Commenting on the results, Kering Chairman and CEO François-Henri Pinault, said: “With discipline and determination, we are executing a far-reaching transformation of the Group, and at Gucci in particular, at a time when the whole luxury sector faces unfavourable market conditions.”
Apart from Gucci, Kering's other major brand, Yves Saint Laurent, also suffered a loss. YSL's sales were down 12% compared with the same period last year, Kering reported.
As a whole, Kering reported €3.8bn in sales in the third quarter, down 15% as reported and down 16% on a comparable basis.
In the first nine months of the year, Kering generated revenue of €12.8 billion, down 12% both as reported and on a comparable basis.
Why Gucci struggles in China
China is the world's biggest spender in the luxury sector, accounting for half of global sales. But as its post-pandemic recovery falters, consumption has flagged, sending jitters through the industry.
An ongoing property crisis, geopolitical tensions and high youth unemployment rates have weakened consumer confidence in China, which was once heralded as one of the world's hottest luxury markets.
China's luxury market is projected to grow at a mid-single-digit rate in 2024 compared with 12% year-on-year growth in 2023.
Gucci is not alone in facing headwinds in the Chinese luxury market this quarter - LVMH, which owns Louis Vuitton and Christian Dior, reported a 3% year-on-year decline in sales due to waning demand from Chinese consumers.
It’s worth noting though that Chinese consumers still prefer French luxury brands over domestic Chinese brands. A 2022 survey showed that about 29% of Chinese respondents preferred French luxury brands, significantly higher than Italian (19%) or Chinese (17%) brands.
Who is Stefano Cantino?
Stefano Cantino joined Gucci in May 2024 as Deputy CEO following a five-year career at Louis Vuitton, where he oversaw Communications and Image.
Prior to his time at Louis Vuitton, Cantino, a graduate in Political Science from the University of Turin, spent 20 years in the Prada Group where he held senior positions, culminating in his role as Director of Communications and Marketing.
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