Problems are mounting for Gucci as the lawsuit claims unethical animal treatment in its supply chain

Gucci, a traditional luxury brand and top moneymaker for French luxury group owner Kering, has become a monstrous headache for the group and hurt its performance as brand revenues fell 22% in the first nine months of this year.

But beyond the financial, management and design challenges at Gucci, Gucci’s reputation is under threat from a class action lawsuit in the US. The lawsuit alleges that Gucci misled customers by presenting products with exotic skins as ethically produced products. However, a PETA investigation found that pythons and crocodiles were being brutally abused to produce leather, the leather used to make high-end luxury goods.

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

Ethics in question

Kering CEO and Chairman François-Henri Pinault is committed to his company’s environmental, social and governance (ESG) policies.

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

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

“Ethical behavior is a critical driver of reputation – any attempt to mislead customers or mask unethical behavior, even if unintentional, could result in long-term reputational damage and erosion of trust in Gucci,” said Stephen Hahn, executive vice president from Gucci. RepTrak that advises companies on reputation building and management.

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

Declining sales

Gucci’s revenues reached a record high of $11.3 billion (€10.5 billion) in 2022 before taking a step back to $10.7 billion (€10.7 billion) in 2023. That 8% decline was explained by the not-unexpected easing of the post-pandemic luxury spending boom.

But in 2024, the post-pandemic adjustment turned into a complete withdrawal. During the first three quarters of 2024, Gucci has fallen by more than 20%, from $7.9 billion (7.3 billion euros) last year to $6.2 billion (5.7 billion euros) at current exchange rates.

In the third quarter alone, Gucci fell by 26% to 1.8 billion dollars (1.6 billion euros), or 25% on a comparable basis. Difficult market conditions, especially in Asia and the Pacific, took much of the blame.

But it also reported that sales from its Gucci retail network fell 25% and wholesale revenue fell 38%, suggesting that introductions from new creative director Sabato de Sarno are not resonating with customers.

Management unrest

De Sarno came on board in January 2023, replacing Alessandro Michele whose designs are largely responsible for Gucci’s phenomenal growth from 2015 to 2019, when sales more than doubled from $4.2 billion (€3.9 billion) to $10 .4 billion (€9.6 billion).

Michele stepped down 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 appointed CEO of Gucci after joining the company as deputy CEO in May 2024. He will officially take over on January 1, 2025. Cantino previously served as senior vice president of communications for Louis Vuitton for five years and before that was at Prada.

Gucci needs all the communications expertise Cantino can muster as it battles a massive drop in demand and the potential reputational damage caused by the US class action lawsuit questioning the ethics of the brand and parent company Kering.

Gucci’s dirty laundry

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

The plaintiff, Tracy Cohen, claims she unknowingly participated in Gucci’s fraud that required her to perform a “sales ceremony” when offering handbags and other products with exotic skins to customers.

“I trusted my employer to give me a legitimate education. Instead, Gucci lied to me. I have unknowingly misled my clients, many of whom are animal lovers. The animals were not ‘ethically’ sourced, but instead tortured in the name of luxury fashion,” Cohen said in a statement.

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

“We are grateful to Tracy Cohen for coming forward to expose this brazen brand for consistently misleading 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 claim, she alleged discrimination on the grounds of age and mental health and sought damages for violating laws prohibiting discrimination, retaliation, intentional infliction of emotional distress, unlawful labor standards and unfair wages, according to The Guardian.

She is represented in both lawsuits by counsel Tamara Holder, but unlike her personal discrimination case, the claims of customer fraud and animal abuse raise broader ethical issues for Gucci and its customers. It also threatens to expose Gucci’s sales tactics, which are systematically used to encourage customers to spend more on expensive goods.

Animal welfare in the foreground

If consumers become aware of these animal cruelty allegations and Gucci’s sales techniques, it could drive more customers away from the brand rather than towards it, especially as there are growing concerns about the welfare of animals who give up their lives . for the fashion industry.

Kering’s Pinault understands this well when it announced in 2021 that all Kering brands would become fur-free, including 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 its willingness to improve practices within its own supply chain and the luxury sector in general,” he said.

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

Fight or flight?

A spokesperson for Gucci told WWD in July: “We are aware of the recent lawsuit filed by Ms. Cohen. As a company policy, we do not comment on pending litigation or 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 rather than vigorously defend itself in court, a more ethical course may be to thank PETA for exposing such unethical practices in its supply chain and take immediate action to correct it.

“To best navigate this potential reputational crisis, Gucci must operate with full transparency and integrity. By doing this, the negative impact can be minimized,” advises Hahn of RepTrak.

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