Kering’s Gucci aims to steal luxury crown from Louis Vuitton
FLORENCE, ITALY: Italian fashion house Gucci said it aims to reach 10 billion euros in annual sales and replace LVMH’s Louis Vuitton as the world’s biggest luxury label.
The Gucci brand is reaping the benefits of a radical makeover under designer Alessandro Michele, with a flamboyant style that has won over fashion fans and helped sales surge.
Gucci, part of the Kering conglomerate that includes other labels like Saint Laurent, expects eventually to overtake all of its peers including mega-brand Vuitton, owned by Kering’s French rival LVMH.
“We’re in the same league ... The question is not if, but when,” Gucci chief executive Marco Bizzarri told journalists at a strategy update on Thursday.
Last year Gucci, with 6.2 billion euros in sales, came in behind Vuitton – estimated by analysts to bring in over 8 billion euros – as the luxury industry’s number two, in close contention with a few others like Hermes.
It did not set a precise timeline for hitting 10 billion euros in revenue, but said it expected sales to grow at twice the market rate in the coming years as it enjoys a renaissance.
The luxury industry, fuelled by Chinese demand, is expected to pick up pace in 2018, with global revenues forecast to expand by 6 to 8 per cent at constant currencies, according to a report by consultancy Bain on Thursday.
Kering shares however, up more than 35 per cent so far this year, closed down 4.15 per cent following the strategy update, with other luxury stocks like LVMH or Hermes also falling.
Analysts at HSBC said Gucci’s punchy sales targets were achievable. Others said that kind of revenue growth was already priced into the stock and some had concerns about the broader economic backdrop that drives upturns and downturns in the sector.
“This performance is possibly a sign that the market is starting to price in more muted growth in the second half of 2018,” BNP Paribas Exane analyst Luca Solca said in emailed comments, pointing to gaming data in Macau that was lower-than-expected in May and slowing growth in Germany’s services sector.
In a notoriously fickle industry, where tastes can change rapidly and ever more so with the influence of social media, brands are battling it out to capture buyers’ attention with eye-catching designs or events like spectacular catwalk shows.
Gucci’s Bizzarri and Michele, who both came on board in 2015, gave the brand a top-to-bottom makeover, from new product ranges to stores redesigned to make them more welcoming, in vivid hues and draped in velvet. — Reuters