Kering’s challenge to Gucci’s revival amid luxury slowdown

The luxury market is starting to slow down and Gucci, a flagship brand of Kering SA, is experiencing a major decline. This downturn has made it clear that Gucci is struggling as it tries to find its new place in the market and adapt its strategies.

The fate of Gucci

During a visit to a quiet Gucci store in a Paris suburb, there were clear signs of trouble. Items from previous seasons, such as yellow pumps, furry slippers and cool jackets, were sold at deep discounts. This is not common for a high-end brand like Gucci, which competes with Louis Vuitton, Chanel and Hermès – brands that have retained their charm without cutting prices in this way.

Once celebrated for leading fashion trends and innovations, Gucci’s strategy and leadership now appear confused.

Investors and market analysts doubt whether FrançoisHenri Pinault, the CEO of Kering, Gucci can restore its previous success in this crucial period.

Comparative market performance

Other luxury brands within Kering and their competitors have done better than Gucci. This year has been difficult for Gucci, with a sharp drop in sales and several profit warnings causing Kering’s share price to drop significantly.

• Kering shares fell as much as 8.9% in early trading to their lowest since 2018.
• This year, Kering shares fell 20%, while competitors such as LVMH and Hermès International saw their share prices rise.

Gucci accounts for more than two-thirds of Kering’s operating profit. They recently hired Sabato De Sarno as their new creative director. His designs recently appeared in stores.

Recently, the luxury group warned that recovery will take time given the slowdown in the luxury goods market.

Market dynamics and strategic shifts

The decline in the luxury market is linked to economic downturns in crucial areas such as China. Kering’s CFO, Armelle Poulou, pointed out that the Chinese market is deeply divided. Customers choose more expensive items or more budget-friendly products. Gucci is caught in the middle and has made no gains from this division.

In response to these challenges, Gucci is rethinking its product lines, especially its handbags. The brand plans to accelerate new introductions in hopes of capturing customer interest.

Future prospects and sector prospects

Gucci’s adaptation of its collections to market demands is essential for its future performance. The reception of their new designs and their success will be important indicators for the future.

Future product launches will play a key role in how quickly Gucci can recover, which will also impact parent company Kering.

Experts like Luca Solca of Sanford C. Bernstein believe that brands trying to navigate the market during tough times often struggle more intensely. This issue seems especially important for Gucci, leaving investors concerned about the short-term profits for both Gucci and Kering.

Despite these difficulties, there have been promising early reactions to Gucci’s new clothing and shoe lines. These reactions could mark a positive shift for the struggling brand.

As tastes and trends change in the luxury market, it is crucial for brands like Gucci to keep up with what consumers want. For Kering, improving Gucci’s performance is crucial, not only for the brand itself, but also for maintaining a strong competitive position in the broader luxury market.