Gucci Sets Medium-Term Revenue Target of 15 Billion Euros
PARIS — Despite its recent underperformance versus its peers, Kering has high ambitions for its star brand Gucci.
The Italian luxury brand has set its sights on revenues of 15 billion euros, after achieving its previously announced target of 10 billion euros in 2021, according to a document published on Kering’s website during its Capital Markets Day event in Paris on Thursday. It did not specify a time frame for the next revenue milestone.
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By comparison, Louis Vuitton, the world’s largest luxury brand owned by rival French conglomerate LVMH Moët Hennessy Louis Vuitton, generated revenues of 16.7 billion euros in 2021, according to HSBC analyst estimates. LVMH does not break out sales for individual fashion brands.
Gucci has seen exponential growth since 2015, when Alessandro Michele took over as creative director and Marco Bizzarri as chief executive officer. Its revenue at the time was 3.9 billion euros. These days, that is almost equivalent to the brand’s sales in the Americas alone, Kering noted.
But Gucci’s sales have been yo-yoing lately, rising 3.8 percent in the third quarter of 2021, then vaulting by 31.6 percent in the fourth quarter. In the first quarter of 2022, revenues increased by 13.4 percent on a comparable basis, impacted by COVID-19 lockdowns in China.
Detailing its action plan for medium-term growth, hinged on fashion and timeless products, Kering said it saw strong growth potential in the men’s and travel categories. Gucci plans to increase the proportion of leather goods in its sales mix, and expand its Gen-Z clientele with aspirational categories, while simultaneously reinforcing the high-end offer to seduce mature customers.
Having achieved its target of raising sales density to 45,000 euros a square meter, Gucci is striving for a further 30 percent increase, the document said. It plans to increase store space thanks to a 15 percent network expansion and store enlargements, and has almost completed the process of culling its wholesale network as part of a brand elevation strategy.
In a research note, RBC analysts Piral Dadhania and Richard Chamberlain said the target of 15 billion euros implied a compound annual growth rate of 9 percent between now and 2027, “which appears achievable to us in the context of Gucci’s brand elevation strategy, focus on leather goods and rebalanced positioning between fashion and heritage.”
Calling it the “right strategy,” they said Kering management attributed Gucci’s underperformance in China to the absence of a local manager, a situation that has been addressed with the hire of former Tiffany & Co. executive Laurent Cathala as president of Greater China fashion business. He is expected to be in place by the end of June.
In a separate presentation, Kering outlined Saint Laurent’s potential to become a megabrand, with a medium-term revenue target of 5 billion euros, double the 2.5 billion euros in sales registered last year. Kering also said it is targeting revenues of 2 billion euros for its eyewear division, launched in 2015.
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Kering Eyewear Builds Portfolio, Invests in Style, Technology
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