Gucci aims to take on rival Louis Vuitton
With a 45% rise in sales last year, Gucci beat Hermes and now has a revenue target of $12b
After surpassing Hermes, Gucci has Louis Vuitton in its sights. The Italian fashion brand, owned by Kering SA of France, aims to lift revenue to €10 billion ($12 billion) from last year’s €6.2 billion, according to an investor presentation yesterday.
That would rival LVMH’s Louis Vuitton, long the biggest and most profitable name in luxury.
With a 45 per cent increase in sales last year driven by designer Alessandro Michele’s decadent creations — crystal-coated sunglasses and painted handbags — Gucci pulled ahead of Hermes International. It’s also neck-and-neck with Chanel SA but growing faster than the privately held French brand, analysts estimate.
Gucci’s ambition is to become “a definitive 21st century statement of contemporary coolness,” Michele said in the presentation.
Kering shares, which have risen about 35 per cent this year, were down 1.5 per cent at 12:55pm in Paris.
China demand
Gucci and other luxury labels are riding a wave of demand led by China, where sales are surging after a multiyear slump caused by a crackdown on corruption.
Gucci has been the industry’s top performer since the appointment of Michele as creative director three years ago. The current upswing follows a boom-and-bust cycle for the Italian brand, whose fortunes had slumped after the departure of designer Tom Ford in 2004.
While not giving a time frame, Gucci said it aims to widen its operating margin to at least 40 per cent after reaching 34 per cent last year.
The new target would be nipping at the heels of Louis Vuitton, whose margin is estimated at being the highest in luxury.
To achieve the new goals, Gucci plans to increase retail space about 3 per cent a year and triple online sales, which reached €270 million last year. It’s also concentrating more on its own store network as it aims to reduce its reliance on distributors.
Wholesale revenue was 14 per cent of the total in 2017, down from 16 per cent the prior year.