Gucci’s parent braces for sliding sales, as luxury demand unravels over high prices
Not so Gucci… Shares of Kering fell nearly 10% after the French luxury giant reported less-than-swanky earnings. Its overall revenue dipped 11% on the year, while its flagship Gucci brand saw sales slide 21%. (FYI: Kering owns other chic bag brands like YSL and Balenciaga, yet Gucci accounts for two-thirds of its profit.) Possibly to blame: a global spending slowdown and a delayed recovery in China, a key market. The biz expects operating income to drop as much as 45% in the first half of this year.
Spilled bubbly: Dior owner LVMH saw sales tick down last quarter as demand slowed for its high-end jewelry and liquor.
Runway returns: Rival Prada bucked luxe’s trend thanks to strong demand for its Miu Miu line and namesake brand.
Luxury, unraveled… Fashion houses thrived postpandemic as more aspirational shoppers and stay-at-home adults bought $2K YSL bags and $400 Gucci belts. Now, because of inflation-tightened budgets, a lot of these shoppers have stopped splurging. To offset the slowdown, luxe brands hiked prices and tried to attract wealthier clients. The average price of luxury goods online has increased 64% in the US since 2019.
High prices can create loose seams… As the price of luxury goods climbs, top fashion houses are finding that even wealthier consumers can be stretched thin. So while some customers are cutting back, many top earners are opting for “quiet luxury” labels or buying items they think will appreciate in value. Case in point: Hermès (which drops earnings today) saw soaring sales last year as shoppers indulged with pricey new Birkins.