Kering, the global luxury powerhouse, witnessed a decline in its operations in the third quarter of 2023, except for its eyewear division, Kering Eyewear. Notably, Kering’s fashion brands, including the iconic Gucci, experienced a loss of momentum. Gucci’s sales for the period amounted to €2.217 billion, marking a 14% decrease compared to the third quarter of 2022 (-7% on a comparable basis). In contrast, Kering’s competitors, LVMH and Hermès, reported Q3 increases of 9% and 16%, respectively.
Several factors contributed to this decline. Firstly, Gucci, as Kering’s flagship brand, has significant exposure to the Chinese market, which is currently undergoing a notable slowdown. Secondly, consumers in Europe and the United States are reducing their purchases of high-end products. Lastly, economic challenges and inflationary pressures are dampening demand for luxury goods.
Despite this challenging macroeconomic and geopolitical environment, Kering remains unwavering in its commitment to Gucci and its broader roadmap. Gucci, which accounts for half of the group’s revenues, is at the forefront of Kering’s priorities. The recent Spring/Summer 2024 catwalk show, «Ancora,» unveiled in Milan, marked a significant step in Gucci’s evolution. While the response to the collection has been mixed, it is set to hit stores in early 2024, with the first quarter of the next year pivotal in determining its commercial success.
Kering’s management aims to reshape the role of its new designer, Sabato De Sarno, in comparison to Alessandro Michele, Gucci’s previous designer. The emphasis is on a wider communications strategy, including targeted campaigns to revitalize iconic handbag models.
Kering remains focused on executing its strategy to reaffirm Gucci’s unique positioning, enhance production efficiency, improve distribution quality, and streamline operations. While the search for a new CEO is not currently a priority, Kering plans to make strategic recruitments to strengthen Gucci’s team.
In terms of distribution, Gucci is close to completing the rationalization of its wholesale network, and its direct shop network is not expected to see significant expansion in the coming years. Instead, the focus will be on relocations, such as the flagship shop in Paris, which is due to move near Place Vendôme.
Despite recent challenges, Kering retains its confidence in Gucci’s enduring appeal and its potential for growth.
