Saint Laurent Loses Its Uptown Funk

Slimane's exit raises pressure on Gucci to perform

If you want to understand just how powerful Kering's Saint Laurent Paris brand became under the direction of Hedi Slimane, just switch on some music.

Mark Ronson got his "Chucks" Converse sneakers on with Saint Laurent in monster hit "Uptown Funk," while for rapper G-Eazy, a closet full of Saint Laurent is as much a status symbol as a Ferrari. 

The departure of Slimane, who similarly embraced the music industry, throws that prowess into doubt.

It wasn't just in popular culture that Slimane made his mark. Since he arrived in early 2012, the brand's sales nearly tripled and operating profit quadrupled. The rare combination of edgy image and wearable styles helped Saint Laurent -- Slimane dropped the Yves -- achieve the turnaround Kering sought.

Hedi Growth

Sales and operating profit grew strongly under Slimane's tenure

Source: Bloomberg

It's now the darling of the company -- although it accounted for 8.4 per cent of Kering's group sales in 2015, it was responsible for 40 percent of its organic sales growth in the second half of the year, according to Deborah Aitken, analyst at Bloomberg Intelligence.

Though Slimane's departure had been mooted for the past few months, Kering shares dropped as much as 5.4 percent on Friday on the news, reflecting doubts about whether the mega-brand can keep delivering.

The uncertainty could not have come at a worse time for the company. It now has the distinction of having changed leadership at three of its four biggest luxury brands in the past year, including at Gucci and Balenciaga, as well as at suitmaker Brioni.

The broader environment isn't helpful either. Across the luxury industry, brands are grappling to salvage growth as Chinese demand cools. Bottega Veneta has been hit particularly hard by fewer Chinese tourists travelling to Hong Kong and Europe, and Kering is investing to revive the brand as it also battles to improve profits at its sports brand Puma.

The one silver lining is that Slimane's departure may speed up Paris-based Kering's push to contain its cost base, as it can wind down support for his eyebrow-raising move to Los Angeles. Saint Laurent's operating margin had trailed that of Kering's other big luxury brands, although it was closing the gap fast, according to Bloomberg Intelligence. 

Of course, change is not always a bad thing in fashion. The rise of social media, particularly Instagram, means overexposure can leave styles looking stale. Consumers constantly want something new, as witnessed by the spate of designers offering clothes and accessories for sale as soon as they hit the catwalk.

Alessandro Michele, once a little known accessories designer, has breathed fresh life into Gucci since he arrived as creative director about a year ago, and his magic has found favor with A-listers such as Harry Styles.

Kering's discount to Bloomberg Intelligence's luxury peer group had narrowed on the prospects of recovery at Gucci. With Slimane's departure, it has widened again. The company is now trading on 15.2 times the next 12 months' earnings, compared with the 17.5 times average for its peers, according to Bloomberg Intelligence.

Deepening Discount

Kering pulls away from peers as brands lose leadership

Source: Bloomberg

Kering needs to find a replacement, and one that won't upset the winning formula, fast. The company says it will announce a new creative director for Saint Laurent soon. Anthony Vaccarello, the creative director of Versus, has been linked with the role. Kering won't comment on the rumors.

Given the uncertainty over who will fill Slimane's loafers at Saint Laurent, there is even more pressure on Alessandro Michele to deliver a successful turnaround at Gucci. That means translating his gold-plated fan base into sustained sales and profit growth.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Andrea Felsted in London at

    To contact the editor responsible for this story:
    Jennifer Ryan at

    Before it's here, it's on the Bloomberg Terminal.