Gucci has experienced 11 consecutive quarters of decline, leaving Kering with only “gambling” as a solution
Galan Editorial TeamViews(62)
If you follow the luxury industry, you should have heard quite a bit about Gucci recently.
Unfortunately, none of it is good news.
In mid-April, Kering Group released its first-quarter financial report. The core brand Gucci’s revenue was 1.35 billion euros, down 8% year-on-year and lower than market expectations.
What’s even more heart-wrenching is that this is the 11th consecutive quarter of sales decline for Gucci.
Eleven quarters, almost three years.
Gucci’s continuous decline and Kering’s subsequent “blood loss”
How important is Gucci to Kering? Let me put it this way: Gucci alone accounts for more than half of Kering’s total revenue, and its profit share is even higher.
If Gucci is good, Kering is good; if Gucci is not good, Kering will suffer.
.
The data for the first quarter is quite straightforward:
-
Gucci’s same-store sales fell by 8%, significantly worse than the 4.28% decline expected by analysts
-
Kering Group’s total revenue was 3.57 billion euros, lower than the expected 3.62 billion euros
-
The revenue of the core fashion and leather goods division was 2.85 billion euros, also falling short of expectations
The jewelry division performed well (269 million euros, exceeding expectations), and the eyewear business also grew by 7%, but the growth of these ‘little brothers’ could not fill the gap dug by Gucci at all.
Quarterly decline. What’s the problem?
Gucci has not been without effort.
Changing creative directors, switching product styles, collaborating, marketing… everything that can be tried has been. But from the results, it seems that consumers are not buying it.
The problem lies at three levels:
-
Brand aging and creative fatigue. Alessandro Michele’s maximalist style once made Gucci popular, but the same style has been played for too long, and consumers are tired of it. With a new designer, the style changes drastically, but old fans don’t recognize it and new fans don’t follow, so it pleases neither side.
-
The industry has entered structural differentiation. In the past, the luxury industry was “rising with the tide”, and everyone was rising. Now the tide has receded, and only brands with real competitive advantages can stand firm. Brands like Hermès, Chanel, and Loro Piana, which are considered “hard currency,” remain resilient, while trend-driven brands like Gucci bear the brunt.
Price and value are disconnected. In the past few years, Gucci has frequently increased its prices. However, consumers have realized that spending the same amount of money on Hermès or Chanel will preserve their value better, while spending less on niche designer brands will give them a more unique personality. Gucci is caught in the middle, neither fish nor fowl.
With the new CEO taking office, Gucci is a “top priority”
Kering Group has not been idle.
In a few days, the newly appointed CEO Luca de Meo will officially unveil his strategic blueprint to turn around the group’s fortunes. This professional manager, who has successfully led the revival of automobile brands, is highly expected.
Luca emphasized one sentence at the meeting last night: Gucci remains a “top priority”.
.
Other brands can be put aside for now, but Gucci must be saved. Allow for greater cost of trial and error, as long as it can lead to a turning point.
The question is: how much patience does the market still have?
Since the beginning of this year, the share price of Kering Group has fallen by about 8%. Analysts generally expect that Gucci may resume growth as early as this autumn. However, investors are more concerned about whether the growth is sustainable and whether the profit margin can be repaired simultaneously.
The future of Kering does not depend on how many brands it has
Kering does not lack other brands. Saint Laurent, Balenciaga, Boucheron, Qeelin… all can be considered as leaders in their respective niches.
However, their combined volume is less than half of Gucci’s.
There is a straightforward saying in the industry: The future of Kering does not depend on how many brands it has, but on whether Gucci can still win.
If Gucci wins, Kering will turn around; if Gucci loses, Kering will have no future.
Eleven quarters of decline cannot be explained by “temporary adjustments”. Gucci faces structural issues: brand positioning, product logic, pricing system, channel strategy… It may all need to be overhauled.
The appointment of a new CEO is an opportunity and also the last window.
Time is running out for Gucci.
中文
