How Kering plans to rectify Gucci's slipping sales
Luxury conglomerate Kering, which owns Gucci, Saint Laurent, Bottega Veneta and more, has issued a rare profit warning that Gucci sales are expected to dip by 20% in the first quarter of 2024.
"In a first half that Kering expected to be challenging, current trends lead the Group to estimate that its consolidated revenue in the first quarter of 2024 should decline by approximately 10% on a comparable basis, from last year's first quarter," Kering said in a statement.
Last month, during Milan Fashion Week, Gucci's Creative Director Sabato De Sarno showed his third collection for the brand. He seemed to have found his groove – particularly after the mixed response to his first offering a year prior. He has a minimalist and sexy aesthetic, which is a huge departure from previous creative director Alessandro Michele’s designs, which were much more maximalist.
However, it seems that the Asia-Pacific region hasn't taken a liking to this new wave of Gucci, with Kering noting a steeper sales drop in this region. Upon reflection, Gucci's comparable revenues in the first quarter are expected to be down by nearly 20% year on year.
Gucci AW24 (Luca Bruno/AP)
Winning back the APAC consumer will be key for Gucci but whether Da Sarno's designs are "extra" enough is big question.
After interviewing a number of executives in the luxury space, Yanmei Tang, Analyst at research business Third Bridge says he has his doubts.
“There's a decreasing interest in Gucci in both China and the US. Gucci heavily relies on attracting new Asian customers who are very sensitive to brand heat. Our experts say the new Gucci products introduced so far lack a unique angle and are too similar to past seasons. This makes it unlikely for them to attract renewed interest from customers.
“Our experts say whenever Gucci has attempted to emulate the Louis Vuitton strategy, positioning themselves as super high-end with products emphasising craftsmanship or seasonality without a strong fashion element, the strategy failed.
“Gucci's sales mainly consist of about 60% of existing products rather than new collections. While this strategy boosts profit margins, it's leading to heavy discounts and putting pressure on margins now.”
In February, Kering also revealed that group annual revenue was down by 4% amidst its attempts to "revitalise" its roster of brands. In the fourth quarter of 2023, revenue was down 6% as reported and down 4% on a comparable basis.
As for Gucci, its losses weren't as severe in the fourth quarter of 2023, with revenues down by 4% on a comparable basis. Overall, for 2023 revenues totalled £8.4 billion (€9.9 billion), down 6% as reported and down 2% on a comparable basis.
Looking ahead, Gucci hopes to win back the hearts of its fanbase with its latest Ancora collection. The group has pulled out all the stops, splashing London's underground – and public transport across the globe – with an endless display of Ancora advertisements, which take the form of burgundy red backsplashes stamped with Gucci's crisp white logo. The Ancora collection has been on offer in selected stores since mid-February and is set to gradually become more readily available over the coming months.
