FollowItalian fashion brand, Gucci, pinpoints the luxury spending downturn the primary cause of the company’s poor performance, although blaming itself as well, indicating a revamp in its strategy and the need to hire fresh talents.
All major makers of luxury products have been affected by the worst spending decline within 5 years as economic growth concerns, including conflicts in Ukraine and the Middle East hampered demand from Europeans, Russians, and Chinese.
Moreover, major brands have been suffering from the increasing appetite of consumers for smaller and less widely distributed brands, especially in key markets like China that was considered as the main growth engine of the luxury goods industry until 2012.
Top industry leaders such as Gucci, Louis Vuitton, and Burberry have been thriving in the past 3 to five years so as to rebuild the lost “exclusivity aura” through mass market, while enormously milking the label from the mid towards late 2000s. The shareholders became rich, considering the volume-based technique, however, diluted the brand.
As much as sales performance is concerned, fashion labels like Hermes and Louis Vuitton seem to have done better jobs than Gucci in rebuilding and supporting the exclusive image.
The company sales have been consistently declining for the past year, while Vuitton’s and Hermes’ revenues have been growing, although in low single digits. Burberry has been enjoying a sales increase of over 10%.
Both investors and analysts say Gucci has eliminated plenty accessible items and increased prices too much. Lack of innovation was also blamed, affecting brand desirability, growth prospects, and investor sentiments.
The Prada brand, which opened most of the shops last year, could be another victim of the luxury spending downturn as it expects no sales growth within the year.
