- Gucci’s sales fell in the fourth quarter as spending on luxury goods declines.
- Hermes was an exception, recording an 18 percent sales increase.
Gucci’s sales fell in the fourth quarter as the designer brand struggled with declining demand for luxury goods.
Sales fell 4 percent in the last three months of the year, its parent company, Kering, reported Thursday.
The Italian brand’s CEO said he was “focused on revitalizing Gucci” and would invest heavily in his flagship house in the future.
After a post-pandemic splurge that fueled sales growth in the luxury fashion sector, consumers have begun to cut back on spending.
This was challenged by Hermès, which also published its results on Thursday, but posted sales growth of 26 percent over the same period.
Gucci’s sales fell 4 percent in the final three months of the year, its parent company, Kering, reported Thursday. In the photo, a Gucci store in Rome.
French bag maker Hermes, for its part, enjoyed an 18 percent sales increase.
The maker of the famous Birkin bag said it would raise prices by 8 to 9 percent this year, Chief Executive Axel Dumas told reporters on Friday.
“Hermes is playing in a different league,” JPMorgan analysts said in a note. “Hermes arrives today and demonstrates, in our opinion, what true overdelivery is all about.”
The company said it would pay a bonus of 4,000 euros to each of its more than 22,000 employees worldwide.
Dumas said he had not relied on high prices to drive growth. “We do not drive the group’s growth through pricing strategies,” he said.
Although Chanel, LVMH-owned Dior and Louis Vuitton have raised their handbag prices more aggressively since the pandemic, Hermes dominates the high end of the market.
Prices for Chanel bags have reached levels close to those of Hermes in recent years, but they sell for less on the secondary market.
Louis Vuitton, despite its large scale and “impeccable” marketing execution, still struggles to sell significant quantities of bags priced above 4,000 euros, Bernstein analysts said.
Hermes’ share price has roughly doubled in the last two years. and its valuation is higher than its rivals, with a 12-month projected price/earnings ratio of 48.6, according to LSEG data.
That compares with LVMH at 24.8 and Kering at 16.5. For Gucci, the expectation was low sales given the state of the industry.
“The numbers were bad, but not horrible,” said Luca Solca, an analyst at Sanford C. Bernstein. he told Bloomberg. “This level of underperformance was expected.”
Kering’s share price rose about 5 percent on Thursday despite the decline.
It also owns Yves Saint Laurent and Bottega Veneta. In 2023, Gucci accounted for 68 percent of its operating profits, which amounted to €19.6 billion.
Sales at Yves Saint Laurent fell four percent to €3.18 billion for the year, while Bottega Veneta fell five percent to €1.6 billion.