Is Kering’s core Gucci brand losing its appeal?

By Kevin Rozario |

Sales of Gucci continued to slide in the first half of 2014, following a declining trend last year when the Italian house, owned by Kering, saw a first half rise of +4.1% flatten to +0.4% in the second half.

 

In the first six months of 2014, the brand took a -4.5% knock, with sales down to €1,676.3m ($2,250m).

 

Among Kering’s luxury brands, Gucci is, by far, the biggest revenue earner but it was also the only one in decline. Saint Laurent powered up +25.6% to €320.6m; Bottega Veneta was solid with sales of €525.5m (+12.9%); and Other Brands (such as Balenciaga, Brioni and Boucheron) were up by +17.5% to €708m.

 

The Luxury division is core to Kering’s revenue: it generated H1 sales of €3,230.4m (+4.9%) compared with the Sport & Lifestyle division (Puma and other brands) which was down -5.6% to €1,498.7m.

 

The weak performance from Gucci is partly reflected by a strategic move toward brand upscaling, and amplified by adverse market conditions affecting Asia Pacific says Kering.

 

For example, between 2009 and 2014 Gucci has taken its portfolio away from luxury entry pricing to medium and high price points. The result is that whereas entry-priced bags accounted for 32% of sales in Q2 2009, by Q2 2014 their share was just 2%. In the same period medium and high priced bags’ share went from 66% to 96% (see below and click to enlarge).

 

 

LUXURY REORGANISATION

Kering is reorganising its Luxury activities in order to ensure expansion, both organic  and though acquisitions – it recently bought watchmaker Ulysse Nardin for example.

 

In April, the company announced the creation of two new divisions: Luxury – Couture & Leather Goods led by Marco Bizzarri as CEO, and Luxury – Watches & Jewellery led by CEO Albert Bensoussan. They both report to François-Henri Pinault, the Group’s Chairman and CEO. Gucci, whose Chairman and CEO is Patrizio di Marco, remains under the direct supervision of Pinault.

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