Gucci Struggles as Pandemic Keeps Tourists Home
October 22 2020 - 2:54PM
Dow Jones News
By Matthew Dalton
PARIS -- Gucci reported a 12% drop in third-quarter sales as the
Italian fashion house was hit hard by the absence of tourist
shoppers from Asia during the pandemic.
The results released Thursday show the brand lagging other big
luxury labels in the market upheaval sowed by the coronavirus.
Hermès, the French brand known for its stratospherically-priced
handbags, said Thursday that revenue rose 4.2% in the quarter,
fueled by strong growth in Asia.
Louis Vuitton and Dior drove a 12% sales jump in the fashion and
leather goods division of LVMH Moët Hennessy Louis Vuitton SE.
Gucci is struggling because it has come to depend heavily on
what was, until the pandemic, a highly-profitable strategy: selling
to well-heeled shoppers, particularly the Chinese, when they travel
abroad. With international travel largely locked down, brands have
been forced to encourage shoppers from China and elsewhere to buy
where they live.
Gucci is particularly dependent on Chinese clientele shopping in
European fashion capitals such as Paris, Milan and London. It also
has a large business at duty-free stores in airports. Now it is
scrambling to refocus its marketing efforts for a post-pandemic
world in which international tourism could take years to
recover.
Gucci's sales in Europe were down 47%, a much steeper decline
than Hermès, Louis Vuitton and Dior. Overall revenue was EUR2.1
billion ($2.5 billion) for the quarter.
"We have some work to do compared to peers to re-engage with
local clientele in Europe and elsewhere," said Jean-Marc Duplaix,
chief financial officer of Gucci parent Kering SA.
Gucci is also in the midst of tweaking its image, toning down
the flamboyance that creative director Alessandro Michele brought
to the brand since his arrival in 2015. That look helped revenue
more than double, driven by sales to a younger clientele. But now
Gucci is hoping to gain ground with older shoppers who might not
like some of Mr. Michele's more eclectic stylings, which have mixed
Renaissance-era silhouettes with streetwear and the logos of
professional sports teams.
"We have not, yet, this level of maturity with certain
clientele," Mr. Duplaix said.
In a bright spot for Gucci, sales were booming in the U.S.,
driving revenue in North America up 44% for the quarter. A strong
stock market and the repatriation of tourist spending from overseas
boosted the market, Mr. Duplaix said.
Kering's other brands delivered strong quarters, reversing a
four-year period when robust growth at Gucci buoyed Kering.
Bottega Veneta, one of the industry's fastest-growing big
brands, saw sales rise 17% during the quarter to EUR332 million.
The results show the Italian fashion label continuing its
successful turnaround under the British designer Daniel Lee. Growth
at Balenciaga and Alexander McQueen was also strong, Mr. Duplaix
said.
Write to Matthew Dalton at Matthew.Dalton@wsj.com
(END) Dow Jones Newswires
October 22, 2020 14:39 ET (18:39 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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