Gravity comes for Gucci
After years of strong growth (pandemic aside), Gucci is falling out of favor. The brand’s parent company, Kering, has warned that sales of its flagship brand are expected to be down ~20% year-on-year in the first quarter. The announcement sent shares in Kering down 14%, wiping more than $6 billion off the company’s value, as demand in the crucial Asia-Pacific region softens.
In 2023, Gucci sold nearly $11 billion of luxury goods, making up over half of Kering's total revenue and nearly two-thirds of its profits. Now, as the flagship brand's allure dims in China — which has been the engine of its growth for much of the last decade — Kering will look to the remainder of its budget-breaking portfolio of labels, including Saint Laurent, Bottega Veneta, and Balenciaga, to make up the difference.
Solo misery
Misery loves company... but unfortunately for Kering, these sales woes are mostly its own, with rival luxury behemoths LVMH and Hermès both announcing double-digit sales growth recently.
Indeed, Gucci rides economic cycles arguably more strongly than other high-end labels with the buzz surrounding its designers appealing to “aspirational shoppers” — think people who might own 1 or 2 luxury pieces rather than an entire wardrobe — who are often the first to cutback on luxury spending in downturns. Company execs will be hoping that a burst of creativity from a new designer will get Gucci back to being Gucci.
