Gucci's Latest Revival Fueled by Sequins Rather Than SexBy
Brand’s first-quarter sales rise at fastest pace in 20 years
Label has been highly effective at building digital offering
Gucci is reliving the boom years it enjoyed under Tom Ford with a combination of colorful designs and digital prowess, driving a stellar quarter for parent Kering SA that pushed its shares to a record high.
New creative director Alessandro Michele has turned to a candy-shop assortment of styles featuring whimsical prints and sequins to revive Gucci’s sales, which grew at the fastest pace in 20 years in the first quarter. The new aesthetic is a far cry from Ford’s slinky dresses and high glamor that came to redefine fashion in the late 90s, but fans are snapping the new offering up in droves from its stores and, especially, online.
“They were really great at rejuvenating the offer while sticking to the heritage of the brand,” said Marco Pozzi, senior retail analyst at ContactLab. “They really did a masterpiece on this.”
It’s the latest of several revivals for a mercurial brand founded in Florence in 1921 by Guccio Gucci. Popular in the 1960s and 70s for its colorful floral patterns, the company fell on hard times in the 1980s amid family disputes before a revival under Ford, whose rejuvenation of the label led to the 2001 purchase of a controlling stake by the precursor to Kering. For about a decade after Ford’s 2004 departure, Gucci struggled to keep up momentum under the husband-and-wife duo of designer Frida Giannini and then Chief Executive Officer Patrizio di Marco.
Paris-based Kering’s shares rose as much as 11 percent Wednesday after the company reported growth far above analysts’ estimates, driven by a 48 percent year-on-year increase in comparable sales at Gucci.
Like other luxury houses, Gucci has benefited from a rebound in demand in China after several subdued years that followed a crackdown on corruption, as well as a revival in European tourism.
The brand has been more effective than many rivals at building its digital offering, redesigning the website and adding more products since Marco Bizzarri became CEO in January 2015. It posted an 86 percent increase in online sales in the first quarter, fueling a 60 percent increase in e-commerce revenue for Kering’s luxury division.
Gucci partnered with online wholesalers, designing exclusive capsule collections for Net-a-Porter, and it’s introducing 90-minute rapid delivery in partnership with Farfetch in 10 cities this fall. The label is also investing in store renovations while cutting back slightly on selling space in an effort to increase the productivity of its retail outlets.
“We see the key drivers being the revitalization of the product, notably the handbags across all price points, the benefits of the store refurbishments to sales densities and e-commerce on the new Gucci.com,” analysts at UBS said in a note.
While Ford, who left the label in 2004, was known for slinky satin and velvet and plunging necklines, Michele’s designs have featured embroidered appliques on top of classic Gucci patterns, supplemented by colorful and sometimes cartoonish animal and garden motifs. The new designer was appointed by Gucci CEO Bizzarri in 2015 after the brand’s sales flattened.
UBS says Gucci provides 65 percent of earnings before interest and taxes in Kering’s luxury division, making it the key driver of growth. The Italian brand accounts for 38 percent of Kering’s sales, but strength in the latest period was widespread, with gains at Yves Saint Laurent, Puma and Bottega Veneta.
Even after Gucci’s big quarter, the parent company sees room for growth. Pending initiatives include a new cruise collection and the first perfume under Michele. The goal is to grow profit margins “progressively, and not with the intention of milking the brand,” Kering Chief Financial Officer Jean-Marc Duplaix said on a call.
“Collaboration with Michele is in its early days, and Gucci still enjoys huge potential to grow,” Duplaix said.