100-year-old Gucci is left weakened after Covid

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Gucci is causing luxury group Kering worries: Christmas sales were below par, especially compared to competitors such as LVMH. Is the brand with the capital G's, who is celebrating its centenary just this year, in bad shape?

 

Below expectations

The year did not end on a high note for Kering: between October and December, the luxury group saw its turnover fall by 8.2 per cent to 4 billion euros. On a comparable basis, sales also fell by 5 per cent, while analysts were expecting 1 per cent growth. LVMH, the big rival, registered a slight growth again, despite the Covid troubles.

 

Flagship Gucci - good for as much as 80 per cent of sales and 60 per cent of profits - appears to be the big culprit. Turnover fell by 10.3 per cent to 2.3 billion euros, considerably more than the 4 per cent decline expected by analysts. Yet, online sales tripled in 2020 and other, smaller brands of the group did perform well. Bottega Veneta, for example, sold almost 5 per cent more over the course of the year.

 

Investors worry that Gucci's best days are numbered, despite its efforts to keep up with trends. The brand recently partnered with The North Face, opened a virtual second-hand shop and launched an all-sustainable collection featuring celebrities such as Jane Fonda. Yet, LVMH seems to be winning the argument at the moment.

 

Strategic shift

However, Chief Executive François-Henri Pinault says he is confident that both sales and profits will recover quickly, and even might exceed expectations. The year 2021 will be a year of investment, he told the Financial Times, with Gucci entering the next phase of its strategic shift.

 

The brand, which celebrates its centenary this year, has sharply cut wholesale sales to department stores favouring in-house retail and has also reduced the number of collections to two a year. To celebrate the anniversary year, Pinault - who says Gucci will be in "always on mode" - is planning temporary pop-up stores, new collaborations and a steady stream of events (digital and otherwise) in the upcoming months.

 

For Pinault, organic growth is still paramount, starting with Gucci. A "very encouraging" start in 2021 would reinforce the multimillionaire's belief that the label is still "far from maturity". However, the multimillionaire did not give any specific figures or financial forecasts for this year.