Gucci sales slump 4% but rival Hermes weathers spending drought plaguing the luxury goods sector
- Gucci’s sales fell in the fourth quarter as spending on luxury goods declined
- Hermes was an exception, reporting an 18 percent increase in sales
Gucci sales fell in the fourth quarter as the designer brand struggled with declining demand for luxury goods.
Turnover fell by 4 percent in the last three months of the year, parent company Kering reported on Thursday.
The Italian label’s CEO said it was “focused on revitalizing Gucci” and would invest heavily in the future of its flagship.
After a post-pandemic splurge that fueled sales growth in the luxury fashion sector, consumers are starting to dial back their spending.
That defied Hermes, which also published its profit figures on Thursday, but reported 26 percent sales growth over the same period.
Gucci’s turnover fell by 4 percent in the last three months of the year, parent company Kering reported on Thursday. Pictured is a Gucci store in Rome
The French bag manufacturer Hermes, on the other hand, experienced an increase in turnover of 18 percent
The maker of the famous Birkin bag said it would raise prices by 8 to 9 percent this year, executive chairman Axel Dumas told reporters on Friday.
“Hermes is playing in a different league,” JPMorgan analysts said in a note. “Hermes comes in today and shows in our eyes what true lore 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 it did not rely on high prices to drive growth. “We do not drive group growth through pricing strategies,” he said.
Although Chanel, Dior and LVMH-owned Louis Vuitton have increased the prices of their handbags more aggressively since the pandemic, Hermes dominates the higher end of the market.
Prices for Chanel handbags have reached levels close to those of Hermes in recent years, but on the secondary market they sell for less.
Louis Vuitton, despite its large-scale and “flawless” marketing execution, is still struggling to sell significant quantities of handbags priced above $4,000, Bernstein analysts said.
Hermes’ stock price has roughly doubled in the past two years. and its valuation is higher than rivals, with a trailing twelve-month forward price-to-earnings ratio of 48.6, according to LSEG data.
This compares with LVMH at 24.8 and Kering at 16.5. For Gucci, poor sales were expected given the state of the industry.
“The numbers were bad, but not terrible,” said Luca Solca, an analyst at Sanford C. Bernstein, told Bloomberg. “This level of underperformance was expected.”
Despite the slump, Kering’s share price rose about 5 percent on Thursday.
It also owns Yves Saint Laurent and Bottega Veneta. In 2023, Gucci accounted for 68 percent of operating profit, which totaled 19.6 billion euros.
Yves Saint Laurent’s turnover fell by four percent this year to 3.18 billion, while Bottega Veneta fell by five percent to 1.6 billion euros.