Shoppers no longer splurge on Gucci bags or Balenciaga shoes as they once did, and the “Roaring ’20s” of the post-pandemic boom may be over.
Signs of a slowdown in the luxury goods industry began with slowing sales at Louis Vuitton and Dior owner LVMH. French company Kering, which has struggled to compete with rivals in recent years, is next in line.
Kering reported on Tuesday that third-quarter revenue fell 9% to 4.5 billion euros ($4.7 billion). The decline came as sales at the French fashion house’s two biggest brands – Gucci and Yves Saint Laurent – fell 7% and 12% respectively on a comparable basis.
CEO François-Henri Pinault said: “In addition to challenging macroeconomic conditions and weak demand across the luxury goods industry, the change in our revenue performance in the third quarter reflects the impact of our decision to further enhance the brand and its distribution.” in a statement.
Kering’s weak profits come as the company faces fierce competition from other luxury brands and seeks growth through management changes at Gucci, which accounts for more than half of Kering’s annual sales.
The group is still deeply affected by the epidemic controversial advertising campaign For Balenciaga, this hurt sales in the United States and Europe. Kering is also working to streamline its wholesale distribution network to control pricing, a transition that will be completed in 2024, further dragging down revenue this year.
For its part, Kering is bolstering its position as a luxury goods giant with a series of deals, including a $3.8 billion deal for a fragrance brand July Creed. Many of the top executives were appointed in the past few months and are tasked with returning Kering to its former glory.
“The organization we established in July will allow us to strengthen our guidance to the colleges in the current market environment and regain our position and influence. With the completion of the acquisition of Creed last week, the world’s most outstanding The addition of one of the world’s leading luxury fragrance brands to our family takes our ambitions in beauty to the next level,” said Pinault.
Reinventing Gucci, Kering’s most profitable brand
Italian brand Gucci, best known for its two opposing “G” logos, has proven to be Kering’s crown jewel over the years.But it has gradually lost market share to rivals and failed to reap the benefits of COVID-19 luxury consumption— the new “Roaring 20s” — is very similar to its LVMH counterparts.
To reinvigorate the brand and reorganize its leadership, new creative director Sabato De Sarno has been appointed in january. He launched his first collection in September, which is expected to hit stores next year. Desano’s addition to Gucci’s legacy could be a key determinant of Kering’s future.
“We remain cautious on Kering’s turnaround, as it remains to be seen whether major brand Gucci can successfully restart brand momentum with its new aesthetic,” Barclays analysts wrote in a report this month. Financial Times report.
Luxury isn’t all doom and gloom
While Kering’s challenges are not limited to a squeeze on consumer spending, it has company in the tricky luxury retail market. Sales growth at Bernard Arnault’s LVMH slowed in the third quarter from the previous quarter, signaling that the long heyday of luxury shopping may be over. The group, seen as a leader in the luxury goods industry, attributed the results to “normalization of post-pandemic demand and continued high inventory levels at retailers.”
It’s not all doom and gloom for players in the industry — on Tuesday, French Birkin bag maker Hermès reported third-quarter sales Beat analyst forecastsinstilling hope that consumption will rebound and benefit luxury brands.
“Some people in the industry believe that economic growth may slow down, especially for more affordable goods. But currently we do not see this trend.” Hermès Chief Financial Officer Éric du Halgouët Tell Financial Times.
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