Gucci, a legacy luxury brand and the biggest moneymaker for French luxury group owner Kering, has become a monster-sized headache for the group and hurt performance as the brand’s revenue fell 22% in the first nine months from this year.

But beyond Gucci’s financial, managerial and design challenges, its reputation is threatened by a class-action lawsuit in the US. The lawsuit alleges that Gucci misled customers by presenting exotic leather products as ethically sourced. However, a PETA investigation Spotted pythons and crocodiles have been brutally abused to produce leather that they transform into high-end luxury products.

A ruling last week denied Gucci America’s motion to dismiss the lawsuit originally filed in March in the U.S. District Court for the Northern District of Illinois. The case now goes to discovery to determine how Gucci harvests animal skins and whether it complies with the claims it makes to customers.

Ethics in discussion

Kering CEO and Chairman François-Henri Pinault pays a lot of attention to his company environmental, social and governance policies (ESG).

“For many years, Kering has sought to take the lead in sustainability, guided by a vision of luxury that is inseparable from the highest environmental and social values ​​and standards,” he said in a statement.

However, this suit challenges its ESG claims and jeopardizes the reputation of the Gucci brand, the gold standard when it comes to a luxury brand.

“Ethical conduct is an essential reputational factor – any attempt to mislead customers or mask any unethical behavior, even if unintentional, could lead to long-term damage to the reputation and erosion of trust in Gucci,” said Stephen Hahn, the company’s executive vice president. RepTrak advising companies on reputation building and management.

With demand for the brand cooling, the last thing Gucci needs is for consumers to lose more faith in the brand, giving them another reason to look elsewhere.

Declining sales

Gucci’s revenue reached an all-time high of $11.3 billion (€10.5 billion) in 2022 and took a step back in 2023 to $10.7 billion (€10.7 billion). This 8% pullback was explained by the not-unexpected easing of post-pandemic luxury spending growth.

But in 2024, the post-pandemic adjustment turned into a full retreat. In the first three quarters of 2024, Gucci fell more than 20% from $7.9 billion (€7.3 billion) last year to $6.2 billion (€5.7 billion) at the rates exchange currents.

In the third quarter alone, Gucci fell 26 percent to $1.8 billion (€1.6 billion), or 25 percent on a comparable basis. Difficult market conditions, particularly in Asia-Pacific, took much of the blame.

But it also reported compound sales at its Gucci retail chain fell 25% and wholesale revenue fell 38%, signaling that the pitches of its new creative director Sabato de Sarno were not resonating with customers .

Management disorders

De Sarno came on board in January 2023, replacing Alessandro Michele, whose designs are largely credited with spearheading Gucci’s phenomenal growth from 2015 to 2019, when sales doubled from $4.2 billion (€3.9 billion) to $10.4 billion (€9.6 billion).

Michele resigned in November 2022, and less than a year later, Gucci CEO Marco Bizzarri, who brought Michele in and guided the brand’s growth, left the company. He was temporarily replaced by Jean-François Palus.

This month, Stefano Cantino was named CEO of Gucci, after joining the company in May 2024 as deputy CEO. He will officially take the helm on January 1, 2025. Previously, Cantino served five years as senior vice president of communications for Louis Vuitton and before that was with Prada.

Gucci needs all the communications expertise Cantino can muster as it grapples with a massive drop in demand and potential reputational damage from a US class action lawsuit that calls into question the ethics of the brand and its parent company Kering.

Dirty laundry from Gucci

The class action lawsuit has added weight because it was brought by a company insider who worked for 18 years as a salesperson at Gucci’s Chicago store. The cost covers buyers from January 2009 to the present.

The plaintiff, Tracy Cohen, alleges that she unwittingly participated in Gucci’s fraud by being forced to perform a “selling ceremony” when she presented customers with exotic leather bags and other products.

“I trusted that my employer was giving me legitimate training. Instead, Gucci lied to me. I unknowingly cheated my customers, many of whom are animal lovers. The animals were not obtained ‘ethically’ but tortured in the name of luxury fashion,” said Cohen in a statement.

Earlier this year, she learned that animal farms in Thailand used by Gucci “engaged in the abusive slaughter and skinning of pythons and crocodiles,” from a PETA investigation reported by CBS Market Watch. He revealed that the pythons were killed by hitting them on the head with a hammer and the crocodiles appeared to be still alive when the skinning began.

“We are grateful to Tracy Cohen for exposing this reckless brand for consistently misleading its customers and its own employees about the suffering behind every stitch of its products,” PETA President Ingrid Newkirk said in a statement.

It’s worth noting that this is the second lawsuit Cohen has filed against Gucci this year. In the previous one, she alleged age and mental health discrimination and sought damages for violating laws prohibiting discrimination, retaliation, intentional infliction of emotional distress, abusive labor standards and unfair wages, according to The Guardian.

In both lawsuits, she is represented by attorney Tamara Holder, but unlike her personal discrimination lawsuit, the claims of fraud and animal cruelty raise broader ethical issues for Gucci and its customers. It also threatens to expose Gucci’s sales tactics, which are used systemically to encourage customers to spend more on high-priced goods.

Animal welfare at the fore

If consumers become aware of these allegations of animal abuse, as well as the sales tactics Gucci uses, it could drive more customers away from the brand rather than from it, especially as there is growing concern regarding the welfare of animals that give up their lives. for the fashion industry.

Kering’s Pinault understands this well, as he announced in 2021 that everything Kering brands would go furlessincluding Yves Saint Laurent, Alexander McQueen and Balenciaga. This followed Gucci’s decision to ban fur in 2017.

“When it comes to animal welfare, our group has always demonstrated a willingness to improve practices within our own supply chain and the luxury sector in general,” he said.

“The time has come to take a step forward by ending the use of fur in all our collections. The world has changed, along with our customers, and luxury must naturally adapt to that.”

Fight or flight?

A Gucci spokesperson told WWD in July, “We are aware of the recent lawsuit that was filed by Ms. Cohen. As a company policy, we do not comment on pending litigation or publicly disclose information about former or current employees. We intend to vigorously defend this action in court.” The company did not respond to my request for comment.

But instead of vigorously defending themselves in court, perhaps the most ethical thing is to thank PETA for discovering such unethical practices in its supply chain and take immediate action to correct them.

“To best manage this potential reputational crisis, Gucci needs to operate with full transparency and integrity – that way it can minimize the negative impact,” advises RepTrak’s Hahn.

See also:

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