Gucci No Longer, Who Will Take The Stick?

The risk of frequent luxury goods market is proving again and again that innovation and diversification are the most important assets of luxury brands.

Gucci's performance continues to slow down, and the parent company's Open Cloud group is in a new dilemma.

According to the fashion business bulletin, in the 2019 fiscal year ended December 31st, the sales of Gucci parent cloud group increased 13.3% to 15 billion 883 million euros compared with the same period last year, the growth rate was far less than that of 29.4% in 2018, operating profit rose 19.6% to 4 billion 778 million euros, a significant slowdown compared with 46.6% in 2018, and net profit fell 37.4% to 2 billion 308 million euros.

During the reporting period, the overall sales of the luxury goods department of Kai Yun group rose 13.2% to 15 billion 380 million euros, breaking through the 15 billion mark for the first time. The sales of core brand Gucci increased 13.3% to 9 billion 628 million euros, far less than the 36.9% growth in the same period last year, and the operating profit increased 19.8% to 3 billion 946 million euros. In the fourth quarter, the brand revenue grew by 10.5%, a step slower than the single digit growth rate, and has been slowing down for fourth consecutive quarters.

The picture shows the main performance data of Kai Yun group in 2019, and click to see the larger picture.

Thanks to the balanced development of brand distribution channels, the sales volume of Gucci direct business and e-commerce business increased by 13.2% during the period, while the comparable sales growth of wholesale channels was 13.4%. By region, Gucci increased by 22.4% compared with sales in the Asia Pacific region, including the mainland of China, while comparable sales in Western Europe increased by 12.9%.

Gucci's revenue in the North American market was reversed by advertising and diversified marketing activities. It resumed growth in the fourth quarter, recorded an improvement of 6%, a year-round increase of 2% in sales, and a fourth decline in the fourth quarter of the Japanese market, with a rise of 6% in sales throughout the year.

Although Kai Yun group has stressed that Gucci performance has doubled over the years from 2016 to 2019, the brand growth has been much worse than before. WeChat public number LADYMAX has pointed out that the current market consensus is a fashion cycle of about 3 to 5 years, and Gucci has clearly entered the second half, facing the novelty of the decline and growth normalization.

According to a survey of 750 luxury consumers in China released by Royal Bank of Canada, following the US market, Gucci is losing brand fever in the Chinese market. The purchase intention of the brand's handbags and ready-made clothes has only dropped out of the top five for the first time in sixth, third years.

Although Gucci ranked second in the fourth quarter of 2019, the world's most popular fashion brands and single products list, only after the street brand Off-White, the brand double G logo belt has entered the hottest ladies list in ninth times in less than three years. However, the new products of Gucci did not appear in the burst money, but also reflected a certain lack of stamina. "Lyst"

In addition, Alessandro Michele's philosophy of introducing philosophical topics into cultural hybridity is facing greater risks. Earlier, the black turtleneck sweater "Balaclava" was suspected of racial discrimination. In the spring and summer series in 2020, the model of the white gown similar to the mental hospital's "restrained clothing" showed itself the first to write "mental health not fashion" as a protest. It also reflected some of the audience's aversion to the designer's abuse of fashion to explore social topics.

The development of Gucci has obviously entered the second half, and the trend of freshness decreasing and increasing normalization is determined.

Perhaps it is aware of the root cause of the problem. After opening the third quarter earnings, Kai Yun group confirmed a shocking news that the Jacopo Venturini, who was promoted by Gucci CEO Marco Bizzarri and vice president of marketing, resigned from its duties by the group chief sales officer Matteo Giopp and the global authorized business director of high-end accessories. Pisanu takes over together, which means that the Gucci innovation has finally landed in the product department.

In fact, the strategic focus of Gucci has changed over the past year. First, the double G Logo was suddenly replaced in June. The focus of innovation is no longer confined to the core business such as clothing and handbags, but to further expand the perfume series, and further enter the field of beauty and high-end jewelry, trying to consolidate its leading position in the industry through the rich category matrix. In February 17th, Gucci will open in second Gucci Osteria restaurants in Beverly, Losangeles.

What it means is that after the old rival LVMH announced that it had taken $16 billion 200 million to win the American luxury jewelry brand Tiffany, there was a high-level change in the watch and jewelry department of Kai Yun group. The original responsible person, Albert Bensoussan, left the Patrick Pruniaux, chief executive officer of the Ulysse Nardin Athens table and GP PERREGAUX form, reporting directly to the managing director, Jean-Franois Palus of the group. The Department also owns jewelry brands such as Boucheron, Pomellato and Qeelin.

With the slowdown in Gucci growth, Kai Yun group's "second echelon" is catching up.

Unlike Gucci, Saint Laurent, which belongs to Kai Yun group, rose 14% to 2 billion 49 million euros last year, double that of 4 years ago, and the fourth quarter revenue also recorded 14% comparable sales growth. Including retail sales of electricity suppliers rose 16%, wholesale channel sales increased by 11%. North America became the engine of growth of the brand, sales rose 23%, followed by 17% in the European market, and 13% in the Asia Pacific market, including China.

The replacement of Bottega Veneta after creative director is the biggest highlight of last year's Open Cloud group. Annual sales returned to positive growth, rising 2.2% to 1 billion 167 million euros, and the fourth quarter's revenue rose 9%. In less than two years after joining Daniel Lee, the image of Bottega Veneta quickly reversed. After the first product was launched, it successfully squeezed into the Lyst fashion brand TOP20. According to Lyst statistics, Bottega Veneta launched Padded Sandals sandals became the most popular women's clothing product in 2019.

The burst strategy is a reminder. In just a few months, Bottega Veneta has created a matrix for explosive payment.

According to Glossy news, due to the effective improvement of social media strategy and the popularity of KOL, the online search volume of Bottega Veneta increased by 156% between September 2019 and October, and the rate of return on advertising spending increased by more than 200%. Meanwhile, the product discount of Bottega Veneta has dropped significantly since November 2019, indicating that the sales rate of single products is rising, which will bring better sales performance for the brand.

At the annual British Fashion Awards BFA awards, Bottega Veneta defeated a number of competitors to become the big winners. Not only did they win the annual brand award, but Daniel Lee also won the three awards of the annual accessories designer, the annual women's wear designer and the annual designer.

Sales of other sectors including Balenciaga, Alexander McQueen and other brands increased most significantly, up 17.8% to 2 billion 537 million euros compared to the same period last year, including double-digit growth in jewelry business such as Boucheron and Qeelin, while Alexander McQueen ushered in the same name 10th anniversary yesterday. McQueen is the potential stock of Kai Yun group's most promising 1 billion euro club.

The sales of cloud glasses Department increased by 18% to 596 million euros, mainly due to the sale of Gucci, Yves Saint Laurent and Cartier brand glasses. However, Kai Yun group will return the design and distribution rights of Gucci glasses to Safilo, the Italy eyewear manufacturer. The two sides have signed a new cooperation agreement for three years.

So far, Kai Yun group wants to dominate the field of luxury goods "B plan" has surfaced, but its real crux lies in the brand matrix layout.

LVMH's annual revenue of over 10 billion euros, the largest volume of brand Louis Vuitton flagship pure luxury attributes, on this basis, recent active social media in the second core brand Dior, coupled with Givenchy, Celine and other tier two brand in recent years bear the role of the middle market.

Chanel's advanced customization business has established a solid foundation for luxury goods, but relies on the lower price of beauty cosmetics and other low price businesses to contribute. Hermes has allowed the handbag business to expand its clothing, perfume and cosmetics business, becoming the pronoun of the word "luxury". Even perfume and beauty make no connection between the brand and the popularity.

The core brand or business of the luxury goods group is high on the benchmark of luxury property (benchmark), and the subsequent derivative business and the second tier brand can keep up. However, the situation of Kai Yun group is that the aesthetic system of Gucci under the leadership of Alessandro Michele is loved by the public because of its wide variety. However, its style determines that Gucci is not easy to be "luxurious" and not pure enough to provide a solid foundation for luxury attributes.

Bottega Veneta, which can embody luxury attributes, is not big enough. Saint Laurent earned 1 billion 743 million euros last year, and other sectors made up of Balenciaga and Alexander McQueen last year just passed 2 billion 100 million euros. The difference between the second tier brands and Gucci is too large, so once the Gucci of the group's 60% income is slowed down, it will be easy to get out of sight.

In this case, luxury groups tend to adopt mergers and acquisitions to improve the pattern. Earlier, it was reported that Kai Yun group was interested in acquiring Italy's luxury feather down brand Moncler, but the latter said that it had not sold the plan in the near future. Other analysts believe that the sustainable development strategy recently initiated by Kai Yun group will be a constraint on brand development, and LVMH will be more pragmatic in terms of business efficiency.

Therefore, the performance of cloud Group continues to rise on the surface, compared with the continuous acceleration of LVMH, but it began to be inadequate. According to fashion business express data, with the strong growth of core brands Louis Vuitton and Dior, the LVMH fashion leather department sales increased by 20% to 22 billion 237 million euros last year, which has recorded double-digit growth for 13 consecutive quarters, and operating profit has risen 24% to 7 billion 344 million euros. After taking the Tiffany, LVMH jewelry watch business revenue will increase by at least 4 billion euros.

What is more vigilant for Kai Yun group is that the first beauty series that will be released in February 26th will be launched next month. The analysis is expected to be another growth point of the brand except platinum package. In the third quarter, Hermes sales rose 18% to 1 billion 700 million euros, and rose 21.5% to 2 billion 573 million euros in the Asia Pacific market, including China.

However, Franois-Henri Pinault, chief executive of Kai Yun group, has not been in a mess. He pointed out in his earnings report that revenue has exceeded 15 billion euro mark last year, and its operating profit margin has exceeded 30% for the first time. In the future, the group will continue to focus on the medium and long-term development strategy. For the decline in net profit, he said that Gucci was mainly paid by the Italy tax bureau to pay 1 billion 400 million of the tax impact.

Referring to the recent outbreak of new crown pneumonia in China, Franois-Henri Pinault said its brand's business in the market had been challenged, but the group has built strong ties with Chinese consumers over the years. Jean-Marc Duplaix, chief financial officer, revealed that Hongkong's sales in Hongkong fell 50% in the fourth quarter, but was offset by strong growth in the mainland. For the new crown pneumonia epidemic, he admits that the short term is full of uncertainty. But in the medium and long term development, management is still confident of the potential of the Chinese market.

Under the current circumstances, the opening plan of Kai Yun group and Hang Lung real estate will be temporarily shelved. At the end of last year, Sergi Villar, the real estate director of the group, said that the 5 luxury brands of Kai Yun group will open 14 new stores in 6 cities in Shanghai, Dalian, Kunming, Wuhan, Shenyang and Wuxi, all new and second tier cities except Shanghai. The move is considered by the industry to be a sign of the sinking of the group.

In contrast, LVMH's attitude tends to be cautiously optimistic. The Bernard Arnault, the CEO of the giant, said that after the outbreak of the conference, it had passed the air with the Chinese team. According to the information he knew, the epidemic would be controlled in a few weeks. "Our first response is not to panic and calm down. We think it is too early to predict growth.

But analysts and investors are getting more and more worried. Pierre Brian, a Dow Jones analyst, warned ten days ago that the luxury retail environment around the world, especially in the main cities of mainland China, was not optimistic. Those luxury brands who chose to use holiday marketing in fierce competition had suffered the most direct loss during the Spring Festival.

According to the fashion business express, after the outbreak of the new crown pneumonia, LVMH's stock price dropped nearly 10% from the high point in January 17th, evaporated nearly 20 billion euros, and the group of open clouds and Hermes also fell to varying degrees. As of press release, Kai Yun group shares rose 1.74% to 572.4 euros, the market value of about 72 billion 300 million euros.

The tough battle between luxury owners in 2020 is still continuing. But this sudden "black swan" is like a watershed. After the "China" board is removed, the water left in the bucket is the most obvious.