Gucci has problems. The biggest may be a safe new look
Subscribe to enjoy similar stories. A tough market for luxury goods is covering up deeper issues at Gucci. The brand’s revamp isn’t taking off yet and its owner’s pockets are shrinking.
Kering, the French luxury group that is Gucci’s owner, issued its third profit warning of the year on Wednesday evening as it unveiled quarterly results and now expects 2024 operating income to be barely half last year’s levels. Its star brand is weak. Sales at Gucci fell 25% in the third quarter compared with the same period of 2023.
The label has been shrinking for more than a year and its performance has fallen behind rival fashion brands at luxury giant LVMH. Kering is giving Gucci a makeover and replaced its creative team a year-and-a-half ago. The flashy designs that Gucci had become known for are out in favor of a more subtle look.
If the brand can successfully pull off this new classic image, it should be less vulnerable to the fickle fashion cycles that have made Gucci’s sales volatile in the past. New designer Sabato de Sarno’s collections still only make up around a third of what is available in Gucci’s stores. But when asked how new handbag models are selling, Kering’s finance chief sounded muted.
Gucci’s wholesale business had a very weak quarter. This could be a sign that the brand is being disciplined about who it sells inventory to, as luxury brands battle a surging parallel market for designer goods in China. Or it might instead be a sign that Gucci’s new collections haven’t been a hit with industry buyers who select the stock for luxury department stores.
Some challenges are out of Kering’s control. Gucci’s sales to Chinese consumers fell 35% in the quarter. Many of the factors that led China’s shoppers to spend heavily
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