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Former Vuitton and Prada executive must execute a turnaround of the struggling Gucci brand

Weeks after joining Gucci as deputy chief executive in May, Stefano Cantino rubbed shoulders with stars and owner Kering’s top brass as the Italian brand took over London’s Tate Modern to stage its lavish runway show.

But the spectacle and huge after-party — where Kering executives mingled with guests and supermodel Kate Moss draped herself over Mark Ronson’s DJ booth — barely masked the difficulties ailing Gucci is facing.

When Kering this week announced its decision to promote Cantino to chief executive of the French luxury conglomerate’s biggest brand and profit centre, they were counting on his five-year stint at LVMH’s Louis Vuitton and two decades at Prada to lead the Florentine house out of decline.

It is a tall order. Cantino is now charged with executing the biggest and most complex turnaround in the sector at a time when global appetite for high-priced handbags and fashion is ebbing and growth engine China is faltering.

“Stefano Cantino becoming chief executive doesn’t surprise me, this was the plan from day one,” said Thomas Chauvet at Citigroup, although he added that the degree of downturn in the market and pressure on Gucci may have increased the urgency.

“I don’t expect a revolution . . . He will have to work on making sure what has been done in the past 18 months” under predecessor Jean-François Palus “materialises into numbers”.

Gucci is in urgent need of revival.

Kering this year issued several profit warnings, a rarity among big luxury groups, because of cratering sales at the brand, and has alerted investors that it expects group operating income in the second half of this year to be 30 per cent lower than the same period in 2023.

Barclays expects Gucci sales to be down 23 per cent in the third quarter against a year earlier.

Born in Turin, Cantino studied political science at the city’s university before joining Prada. During two decades at the luxury group, where he rose to lead communications and marketing, he worked closely with Francesca Bellettini, now deputy CEO of Kering.

They stayed in touch after he left in 2018 to join Louis Vuitton, which at the time was undergoing rapid growth under chief executive Michael Burke, becoming the first luxury brand to crack €20bn in annual sales.

The 57-year-old takes the lead at Gucci at a time of flux, with new designer Sabato de Sarno less than two years and six collections into the role following the departure of former star designer Alessandro Michele.

Cantino replaces Jean-François Palus, a three-decade Kering veteran who was appointed interim Gucci CEO in July 2023 and is a close associate of group chief executive François-Henri Pinault.

While that interim role was made permanent in February, people with knowledge of the situation said the plan was always to have a fairly rapid transition.

Palus’s goals were “to assess the Gucci situation, bring efficiency and search for the CEO . . . We identified Stefano very fast,” said one person close to Kering.

Cantino “combines together exactly what we need at Gucci, because Gucci is a company with two souls: the soul of heritage and the soul of fashion”, the person added. “Having been at Prada and Louis Vuitton, he combines both — that double experience is very precious to us.”

Since arriving at Gucci, Cantino — who is described as direct, exacting and analytical by people who have worked with him but also as charming and well-connected in the fashion world — has been working closely with De Sarno, including on the brand’s splashy new campaign featuring rock star Debbie Harry of Blondie while working with the Gucci teams on improving product lines and mix.

In addition to contending with a slowing global luxury market, Gucci is also working to reimagine its aesthetic and image several years after Michele’s maximalist vision — which catapulted the brand to huge success for some time — stopped selling well.

Kering hopes that De Sarno’s sleeker, more pared down style will help it achieve its strategy of elevating the brand and making it more timeless so it will be less vulnerable to trend cycles. But it is still not clear whether Gucci’s customers will buy in.

While Cantino’s background centred on image and communications strategy might raise some concerns about his experience with operations, people close to Kering say he has the skills they need.

At Prada, he worked not only on brand positioning — a key challenge facing Gucci — and communications but also on strategy and acquisitions, including its 1999 deal to buy British shoemaker Church’s.

Within Kering, executives watched closely as their rival Louis Vuitton appointed the late visionary streetwear designer Virgil Abloh, then musician and producer Pharrell Williams to design menswear, providing big boosts to the brands and widening its audience during Cantino’s time there.

At Vuitton, “in terms of product architecture, he did a lot”, said the person close to Kering. “The turnaround [at Gucci] is not only about taking a listed company and turning it around, but it’s also turning around big areas within big organisations. This is where he is really good.”

This is not the first time Kering has had to reinvent Gucci, but the brand still has a long way to go.

“Changing brand perception through reduction of outlets [and] brand elevation does take time,” analysts at Barclays wrote, but “we think that Gucci’s recovery story could be delayed . . . Current expectations could be too ambitious, and [we] see risks of further earnings cuts.”

With Cantino set to take charge in January, “the full casting is now in place,” said Chauvet at Citi. “Now it’s all about execution.”

Companies are struggling to establish a clear path in their energy transition strategies

Finding common threads in the European oil majors’ energy transition strategies is not easy.

There is still a somewhat experimental approach across the sector: Eni is building satellite businesses it can sell down, or possibly float. TotalEnergies is growing electricity generation and liquefied natural gas production. BP has pushed into areas such as EV charging — and is reportedly preparing to abandon its 2030 target to cut oil and gas output.

This week, Equinor added another move to the mix. It has built a 9.8 per cent stake in offshore wind developer Ørsted, becoming its second-largest shareholder behind the Danish government. It should prove a value-creating addition to the strategic sorting hat. But it is not something others will necessarily ape.

Equinor was a relatively early mover in offshore wind. It already has an operational portfolio of about 1GW, and 2GW under construction. In recent years, though, it has often been priced out of European auctions for seabed leases. It has cancelled some early-stage projects as the industry continues to grapple with higher costs.

Given its recent troubles in the US, Ørsted might not look the best of targets. But it has a decent portfolio of 10.4GW of operational renewables assets, plus more under construction. Even if you assumed Equinor paid 10 per cent of Ørsted’s roughly $25bn market capitalisation as of last Friday — the final trading day before the announcement — it looks as though Equinor is getting a decent discount to access a slice of those assets. The total net asset value of Ørsted’s portfolio is about $30bn, estimates Bank of America’s Christopher Kuplent.

Of course, investors may wonder why Equinor does not return more money and let them decide if they want exposure to a large renewables developer. That is an argument oil and gas CEOs will continue to have.

In its defence, Equinor can point to plenty of cash returns already. It has promised total distributions in 2024 of $14bn, including buybacks and dividends — equivalent to nearly a fifth of its market cap. The Ørsted deal should not alter future planned returns. Equinor can easily shoulder the estimated 5 per cent increase in its net debt ratio that Bernstein expects will follow the deal.

This is unlikely to start a frenzy of renewables stake buying across the industry, however. Not all have the same balance sheet strength. BP, for instance, has faced questions over whether it can meet its $7bn annual share buyback from 2025 onwards.

If Equinor’s latest move is suggestive of any theme, it’s that the European oil majors are still struggling to find a clear path to 2050.

World’s largest money manager benefited from a rebound in markets

BlackRock’s assets under management surged to a record $11.5tn, as the world’s largest money manager benefited from a rally in markets and attracted cash from investors.

Revenue rose 15 per cent to $5.2bn, surpassing analysts’ expectations, while improved margins lifted the group’s net income to $1.63bn.

Assets shot up 26 per cent in the quarter, powered by $160bn in long-term flows and an additional $61bn in new money to cash management products, as BlackRock benefited from investors preparing for interest rates cuts from the US Federal Reserve.

“Our strategy is ambitious, and our strategy is working,” chief executive Larry Fink said on Friday. “We are effectively leveraging our technology, scale, and global footprint to deliver profitable growth.”

BlackRock shares are up nearly 20 per cent this year, nearing a record high $971 set in November 2021. The shares were little changed in pre-market trading on Friday.

Analysts polled by Bloomberg had expected revenue of $5bn. Adjusted operating income rose 26 per cent to $2.1bn, beating expectations of just under $2.0bn.

Nearly two dozen groups owned by German financier scheduled to be sold next week

Nearly two dozen companies owned by German financier Lars Windhorst are due to be sold at a foreclosure auction this month, following a court order obtained by the family company of US billionaire Frank McCourt.

The auction is the latest attempt to claw back debts from the embattled businessman, who in recent years has been hit with multiple lawsuits by a series of creditors, with claims reaching into the hundreds of millions of euros. 

It is a setback for Windhorst, who has strived to turn around Tennor Holding, his ailing investment company, following the insolvency of a set of businesses it owned from medical robotics to luxury lingerie.

The auction is a result of a lengthy legal dispute between Windhorst and McCourt Global over the sale of its shares in an international show jumping competition to Tennor Holding.

A subsidiary of McCourt Global — which was founded by former Los Angeles Dodgers owner Frank McCourt — has obtained court orders allowing it to sell shares of Tennor Holding’s subsidiaries, in order to satisfy a debt of $106mn plus interest.

In 2020, Tennor Holding agreed to buy 50 per cent of show jumping business Global Champions from McCourt Global for €169mn, but then tried to back out citing financial difficulties due to the coronavirus pandemic.

Windhorst later agreed to proceed with the deal, but failed to comply with the payment terms relating to the share purchase, according to court records.  In April, a Dutch judge ruled that Windhorst could be detained if he travelled to the Netherlands for failing to comply with asset disclosure obligations in the case. 

The auction, slated for October 16 in Amsterdam,  involves 22 companies registered in the Netherlands and Switzerland. They include La Perla Fashion Holding, the previously listed parent company of luxury lingerie maker La Perla, whose UK arm was wound up in November last year over unpaid tax debt, as well as the company through which Windhorst previously owned Berlin football club Hertha Berlin, according to a public auction notice. It does not include Tennor Holding, Windhorst’s main investment company.

The notice warns that information about the companies that form part of the auction “may not be accurate or current”. Tennor and the companies had “not fully cooperated . . . despite various court orders to that effect”, and had “refused to allow the bailiff access to their share registers”, according to the document.

The notice further cautions that no assurances could be given that the companies owned any meaningful assets or that their shares had any value and that they were not free from encumbrances or third-party rights. 

McCourt Global declined to comment when asked how much money it hoped to raise from the auction.

Over the past decade, Windhorst raised billions of dollars from investment firms and wealthy individuals to fund his business ventures, primarily through bonds. However, he has faced multiple lawsuits from aggrieved creditors who have claimed that he failed to honour repayment agreements. 

Illiquid bonds linked to Windhorst’s companies were at the centre of a high-profile scandal at France’s H2O Asset Management, which was one of Windhorst’s major backers and at one time had an exposure of more than €2.3bn to Windhorst-linked securities.

In recent years, the financier has pursued new deals through a Swiss entity called Tennor International. In July, Nathaniel Rothschild, the scion of the Rothschild banking family, agreed to take a minority stake in Tennor and act as executive chairman.

Windhorst did not provide a comment for publication.