You've probably read by now that Louis Vuitton had a great first fiscal quarter. LVMH reported an 11% increase in its Fashion & Leather Goods division, the largest contributor to which is Louis Vuitton. This is newsworthy for several reasons, one of them being that this growth comes on the heels of a shift in strategy/positioning from the Paris-based design house. Following several quarters of slow sales and an increasingly LV-logo saturated market, it became very apparent that Louis Vuitton had essentially lost its luster in terms of exclusivity in the minds of luxury consumers. As a result, it began limiting the availability of new bags by producing less, upping prices and focusing more heavily on its leather range, which demands higher prices than its canvas counterparts. As of today, Kering reported its first quarter fiscal growth. So, how does Gucci measure up?
Well, it doesn't. Gucci has not reported an increase in sales to match Louis Vuitton's, despite its efforts to revamp its brand much like its Parisian rival. Interestingly, Kering, which began its Gucci-repositioning efforts before LVMH (including a clean-up of its wholesale distribution network), reported that the Florence-based brand's performance improved only modestly in the most recent quarter, after sales fell 3.2% in the same quarter last year. Kering itself reported a 1.2% increase in revenue from $3.28 billion to $3.32 billion.
Judging by reports, Gucci’s lack of growth is a bit troubling. According to Bloomberg, "Gucci's 'somewhat subdued' growth leaves investors 'with unresolved doubts on the future trajectory of the brand.'" Moreover, Kering is reportedly looking to increase focus on individual brands, which are growing faster than Gucci. While the brand is working to introduce more expensive garments and accessories and upgrading its stores in attempts to win back customers, who are switching to brands they perceive to be more exclusive, Louis Vuitton appears to be well on its way to even more growth, as does Burberry, which also reported a notable increase in sales.
As for Kering's other brands, things are not quite as somber. Quarterly revenue rose fastest at Saint Laurent, which, under the creative direction of Hedi Slimane, reported a 27 percent increase, well exceeding analysts’ estimates for 18 percent growth. According to a statement from Kering, ready-to-wear and leather-goods growth at Saint Laurent was “outstanding."
Kering hopes to make up for lost sales at Gucci by reorganizing its luxury activities, which it plans to accomplish by creating three new divisions to better manage its brands. Other changes are afoot at Kering, as well. Alexis Babeau, who has served as managing director of the conglomerate's luxury division since 2011, is set to depart “to take his career in a new direction” Starting next month, Babeau's role will be split in two; Marco Bizzarri will oversee couture and leather-goods brands, excluding Gucci (which has been under the control of CEO Patrizio di Marco since 2009), and former LVMH Moet Hennessy Louis Vuitton executive Albert Bensoussan will oversee watches and jewelry. More to come ...