Gucci sales slide as pandemic ends its years of expansion

Bloomberg

Gucci sales fell for a fourth quarter, ending years of expansion as the luxury brand and growth motor of Kering struggled amid renewed lockdowns in Europe.
Revenue at the Italian luxury brand dropped 10% on a
comparable basis to 2.28 billion euros ($2.76 billion) in the three months through December, Kering said on Wednesday. Analysts had expected a 7.2% decline.
The shares fell as much
as 9.2% in Paris, and they’re down 11% over the past 12 months.
Kering’s results contrast with rival LVMH’s more buoyant performance. The Louis Vuitton owner’s sales surged in the quarter, driven by demand from Chinese consumers who have been spending at home with travel abroad virtually
impossible.
Gucci has been reducing its wholesale footprint as it bets this strategy will enable it to better control its image as well as the pricing of its leather handbags and other items.
Analysts warned this move would hit revenue in the last three months of last year but was the right decision for the longer term.
The luxury brand was also hurt by renewed lockdowns in Europe that shut stores during the period. In a call with reporters, Chief Financial Officer Jean-Marc Duplaix said negative trends continued in the region at the start of the year.
The pandemic brought an end to years of soaring growth at the Italian brand, which was just shy of 10 billion euros in annual revenue in 2019. Under the leadership of Chief Executive Officer Marco Bizzarri and Creative Director Alessandro Michele, revenue more than doubled between 2015 and 2019. The brand’s popularity on Instagram — the go-to
social media platform for fashionistas — also boomed, with followers outnumbering those of rival Louis Vuitton.
Still, Gucci has sometimes been seen as too ostentatious, especially during pandemic times when consumers may be less keen to buy conspicuous items. While the brand is extremely popular in China, in Europe its client base is weaker, even though it will celebrate its 100th anniversary this year. The brand plans various actions for this anniversary, Duplaix said.
Kering carried out two phases of price increases on Gucci products last year, including in October, Duplaix said. With sales growing in China as travel globally is restricted, luxury brands have been raising prices there. That’s closed the gap with Europe, where tourists from that country used to splash out
during visits.