Image Source: Free Images

The Highs & Lows Of Luxury As Kering’s Gucci Falls While Others Soar

By Lesley Rennis

  • Gucci, a long-standing household name is experiencing a downturn in sales, contributing to 4% of Kering’s overall 6% losses by the end of 2023
  • Other luxury brands such as LVMH don’t share the same fate as they are seeing unprecedented profits in market forecasted to generate $368.90B revenue

Kering (KER.PA -3.13%) , the French luxury group that owns Gucci, Yves Saint Laurent, Bottega Veneta, Balenciaga, and other luxury brands, warned that first-quarter revenues are expected to decline 10% from last year’s $5.5. billion. The announcement is rare for Kering, number two in the global luxury market. The conglomerate projects its flagship brand, Gucci, to be off nearly 20%, down from $2.8 billion.  

Why This Matters: Half of Kering’s sales and majority revenue streams are pegged on more than two-thirds of its profits from Gucci. Gucci experienced consistent growth throughout the pandemic, with its operating income jumping to 60% and Kering shares rising to 6.5%. However, rising inflation and shifts in consumer preferences has pushed consumers towards quiet luxury brands and the secondhand apparel market as they look for sustainable ways to maintain style. This coupled with the unfavorable economic downturns, Gucci has been struggling to stay relevant as its long-standing maximalist image contrasts with the new trend. 

Additionally, the company underwent a management shakeup, appointing a new creative director and new CEO in 2023. Shares started sliding in early 2024, while other luxury brands reported growth in sales. According to Kering’s CEO Franois-Henri Pinault, “Gucci has not kept pace with its peers.” Kering’s biggest competitor, LVMH, ended fiscal 2023 up 9% on a reported basis, equating to 13% organic growth, reaching $93 billion. Its fashion and leather goods reporting sector, closely comparable to Kering, was up 9% reported (14% organic) to reach $45.6 billion. Other brands like Hermes and Prada have posted strong full-year results and seem to appeal to consumers looking for understated elegance.

Situational Awareness: Despite inflation kicking every business, it’s a marvel how other luxury brands are registering record-breaking profits. But why has Gucci been left behind? Why is the luxury goods market projected to generate a revenue of $368.90 billion? Well, it’s all about positioning, innovation and brand strategy. LVMH already tapped into the resale market with its Nona Source platform so Gucci needs to find its niche to keep up or outpace its competitors. With more consumers turning to these brands and to the secondhand apparel market, Gucci’s traditional dominance in luxury fashion faces increasing competition. There’s a need to adapt to evolving consumer preferences and sustainability demands.

 CBX Vibe: All the Way Up” Fat Joe, Remy Ma, French Montana, InfraRed

Welcome to CultureBanx, where we bring you fresh business news curated for hip hop culture!