Italy's luxury brand "Gucci" recorded sales of approximately 1.9 billion euros (about 2.9 trillion won) in the fourth quarter of last year, falling short of market expectations. Gucci's slump is shaking the performance of its parent company, Kering Group. With even the core figure leading the brand's recovery, the creative director (CD) absent, Gucci's downturn is expected to persist for some time.
According to the Financial Times (FT) on the 11th (local time), Kering Group stated that Gucci's sales in the fourth quarter of last year were recorded at 1.9 billion euros, down 24% compared to the same period the previous year. A significant decline in sales through wholesaling outlets such as department stores and duty-free shops contributed to a 53% drop in sales over the past year. Retail directly operated retail sales fell by 21%.
Annual performance is also poor. Gucci recorded sales of 7.7 billion euros (about 12.6 trillion won) and operating profit of 1.6 billion euros (about 2.4 trillion won) for the fiscal year 2024. Sales decreased by 23% compared to the previous year, and operating profit plummeted by 51%. Gucci's sales, which had surpassed 10 billion euros (about 15 trillion won) in 2022, have been on a consistent downward trend since then.
The reasons for Gucci's slump are complex. FT evaluated that "while the deterioration of major markets, including China, had an impact, Gucci's loss of brand identity and its weakness in adapting designs to trends severely hit Kering's flagship brand." Gucci is a core brand that accounts for 50% of Kering's total sales.
As Gucci's struggles continue, the parent company Kering Group has also suffered significant setbacks. Last year, Kering recorded sales of 17.2 billion euros (about 25.9 trillion won), a 12% decrease compared to the previous year. Operating profit showed a decrease of 46% to 2.55 billion euros (about 3.8 trillion won). Kering's fourth-quarter sales also decreased by 12% compared to the same period the previous year.
Analyst Luca Solca of investment bank Bernstein noted, "Last year was a 'horrible year' for Kering," emphasizing that "while operating profit trends in almost all brands were better than expected, the absolute decline compared to 2023 is very striking."
A bigger problem is that there are no signs of recovery for Gucci. Kering declared last week the separation from Gucci's creative director, Sabato De Sarno, resulting in the Gucci design team lacking a leader as they prepare for the next show. Gucci had recruited emerging designer Sarno in January two years ago, but his experiment ended after two years.
Gucci has continued to struggle since parting ways with creative director Alessandro Michele in 2022. Michele, who was appointed in 2015, is credited with revitalizing Gucci's style by increasing sales by over 40% within four years.
A successor to Sarno has yet to be determined. Earlier, on the 6th, FT reported, citing internal sources, that "Kering began seeking alternatives to (Sarno) since last summer," adding that "they contacted Jonathan Anderson, the creative director of Loewe under LVMH, but Anderson did not feel confident about Gucci's offer."
The industry expects Gucci's recovery to be slow. Flavio Ceredda, a fund manager at global asset management firm GAM, noted, "If Kering recruits the right designer for Gucci and delivers the correct message, it may regain market trust," but he added, "substantial performance improvement will take time. If the designer is excellent, it might take three seasons, but generally, it will take four to five seasons before the numbers reflect that."