Gucci – Louis Vuitton Competition to Heat Up with US$12 Billion Revenue Target
Gucci made announcement of their ambitions on Thursday for US$12 billion revenue targets following Burberry and Louis Vuitton’s own shareholder briefings to invest greater revenues
In February 2018, Bloomberg reported that Gucci had beat luxury competitor Hermes with a quarter of enthusiastic growth – 43% increase in sales; the resultant surge in revenue brought €6.2 billion to Gucci, outstripping Hermes International’s sales revenues of €5.5 billon by a cool billion euros. Revenue-wise, Gucci is on par with Chanel SA with faster growth to boot.
“Sooner or later, if you look at the different pace of growth, and I think our growth is going to be better, it’s not a question of if, but when.” – ” Gucci CEO Marco Bizzarri to Bloomberg on exceeding Hermes
Now, the Kering Group Italian fashion brand aims to achieve €10 billion (US$12 billion) revenues, placing it in the same area as its biggest and most similarly brand positioned rival, Louis Vuitton, currently the most recognised and most profitable name in luxury. How? Gucci intends to bring more manufacturing in-house, as much an artisanal approach as a strategic decision to have tighter control over production, logistics and distribution, thus keeping costs manageable as luxury brands ramp up efforts to meet increase demands with tighter internal processes.
Gucci v. Louis Vuitton Competition to Heat Up with US$12 Billion Revenue Target
Italian Gucci made announcement of their ambitions on Thursday for US$12 billion revenue targets following English Burberry and French Louis Vuitton’s own shareholder briefings to invest greater revenues into tightening internal business processes, thus better improving ‘time to market’ to cater to increased demand for luxury goods.
If Gucci successfully halves its current dependence on suppliers and meets its US$12 billion revenue targets, they could very well be on track to supplant reigning luxury king, Louis Vuitton as the world’s top luxury brand by sales.
According to Gucci CEO Bizzarri, the Italian luxury brand saw sales rise 49% in the first three months and it is showing no signs of abating. That said, Bizzari was cogniscient of the fact that Gucci fragrance and beauty items were doing “far below market”. However, Bizzari placed expectations for 2018 Gucci retail revenues to hit at least €9 billion, up from €7 billion achieved end 2017.
Gucci rocketed to record growth and sales levels following a makeover under the auspices of designer Alessandro Michele’s opulent and extravagant creations from painted bags, retro-futurist ensembles, crystal sunglasses and impactful accessories. Presently, 75% of leather goods production is provided by external suppliers which Gucci intends to reduce by close to half, thus doubling “time to market” or reaction time according to sales ebbs and flows. This “halving” corresponds with a double pace growth comparative to luxury market and Gucci has its sights set on €10 billion (US$12 billion) in annual revenue.
Business of Luxury: How will Gucci hopes to beat Louis Vuitton
E-Commerce remains the lynch pin of their strategy. In April 2018, it was reported that Gucci online sales more than doubled in the first quarter and Kering Group intends to triple online sales. In 2017, Gucci achieved €270 million from online sales alone. On the storefront, a third of Gucci’s boutiques have been updated to reflect Michele’s retro-flamboyant aesthetic, creating new nostalgic experiences, with plans to increase retail space 3% each year.
As if taking a leaf from Tomas Maier who departs sister brand Bottega, Alessandro Michele has been refocusing on brand heritage, opening a mixed use concept comprising shop, restaurant and museum showcasing Gucci’s 70s glory days. Dapper Dan, subject of a previous Gucci lawsuit for alleged bootlegging of their wares, was also made a partner and associate, re-opening the tailoring Atelier and re-igniting fervour capturing the streetwear zeitgeist or hautebeast.
Under Michele, Gucci has regained some of the fashion and cultural relevance it lost with the departure of designer Tom Ford. In Michele’s own words to Bloomberg, Gucci is to be “a definitive 21st century statement of contemporary coolness.”
No timeline was given for surpassing rival LVMH’s Louis Vuitton and as of publishing, Kering SA shares dipped slightly lower but was still generally on an upward trend following the group’s earlier first quarter announcement that Gucci had beaten Hermes.