Kering SA desperately needs the “Demure Fall” TikTok trend to boost its flagship brand Gucci. The aesthetic — think quiet luxury with a twist — sounds a lot like Gucci creative director Sabato De Sarno’s vision.

But unlike the movement, which is everywhere following Brat Summer, Gucci’s elegant designs have yet to turbocharge the top line. The Italian house needs a deeper makeover.

Sales excluding currency movements at Gucci fell 25% in the three months to the end of September, a deceleration from the 19% decline in the preceding three months, and below the Bloomberg consensus of analysts’ expectations.

In its third profit warning this year, Kering cautioned that 2024 operating profit would be about €2.5 billion ($2.7 billion), the lowest since 2016.

Underlining the challenge, sales at Hermès International SCA, whose Birkin and Kelly bags seem to transcend every fashion trend, rose 11.3%, excluding currency movements, in its third quarter, beating analysts’ expectations.

After the maximalism of former creative director Alessandro Michele, Gucci needed a new look. But Luca Solca, analyst at Bernstein, points out that Gucci’s most successful periods have been when it has a bold image that sets it apart: Tom Ford’s sexiness, and then Michele’s granny chic. It’s not clear that the De Sarno’s designs are audacious enough.

Kering said that the collections were resonating well with its customers, who appreciated an increase in quality and craftsmanship. “Rosso Ancora,” a deep burgundy that has become the brand’s signature shade, is selling particularly well. New handbags – the Blondie, B-Bag and Emblem – have also been well received.

De Sarno’s styles are starting to shape the industry too. Slip dresses with exaggerated lace trims he showed just over a year ago have spawned a raft of imitators. Burgundy is one of the season’s hottest hues, alongside olive green, which De Sarno has also featured.

But Gucci still lacks the buzz of Michele’s early years almost a decade ago. That may explain why it has been struggling to recruit shoppers, particularly in Asia. With more of De Sarno’s products on the way (they currently account for about 35% of Gucci revenue), there’s little reason to buy other parts of the collection, particularly older handbags, which is also weighing on sales. Meanwhile, debuting more expensive items, such as the Blondie, with prices up to about $6,500, adds further risk. One of the appeals of the Michele era was that many bags were below $1,000, relatively affordable for the luxury industry.

Kering has been shaking up the house’s management with Stefano Cantino recently appointed as chief executive officer. Having spent five years overseeing communications and image for LVMH’s flagship brand, Louis Vuitton, Cantino may be able to weave a more compelling story around De Sarno’s products. Other key hires, in stores and digital and the supply chain for example, should also be supportive.

If this doesn’t win over a broader range of customers, there aren’t a lot of strategic alternatives. 

Changing creative directors would mean starting over, less than two years after De Sarno’s arrival. A new designer would need time to assemble his or her team, trawl through Gucci’s extensive archives and come up with a new image.

So, De Sarno making a creative pivot might be a better route. After all, quiet luxury has probably peaked.

Investors will get a clearer idea of whether – and to what degree — Gucci needs to evolve over the next few months. What is evident is that any solution won’t be quick or easy.

It doesn’t help that the luxury industry faces its worst backdrop since the pandemic, and before that, China’s crackdown on conspicuous consumption almost a decade ago.

What’s more, rivals such as LVMH, which is also being hurt by the bursting of the bling bubble, can outspend it. Hermès’s Birkin and Kelly bags create a halo around the brand.

Gucci isn’t the only house in Kering’s stable facing challenges. Comparable sales at Saint Laurent slipped 12% in the third quarter, while at its division that includes Balenciaga and Alexander McQueen, they fell 14%, much worse than expected.

Kering says it will continue to prioritize investment in advertising and promoting its labels. But it is expected to have net debt of about €11 billion at the end of this year, excluding planned real estate deals, leaving it less wiggle room. It will consolidate Gucci’s store estate into fewer locations, particularly in Greater China.

The company is the master of turning its houses from classic to cutting-edge. Indeed, a bright spot was Bottega Veneta, which increased sales by a better-than-expected 5%, helping to reverse the early decline in the shares on Thursday.

But to narrow the valuation discount to luxury peers, Kering needs to work its magic on Gucci. That means capitalizing on Demure Fall  — while it lasts — but even more importantly, being ready to ride the next sartorial wave.