Luxury conglomerate Kering reported lower-than-expected third quarter sales. Kering’s revenue was largely impacted by weakness at Gucci, which contributes over half of the revenue for the luxury division.
Gucci has adopted a more exclusive strategy to elevate its brand image. Focusing on the higher-end of the luxury market, the company is favoring more exclusive products such as crocodile-skin handbags that are worth several thousand dollars over the more aspirational entry level leather products. In the near term, this has taken a toll on sales, especially in China, a key market for the luxury goods industry. Chinese consumers has yet to embrace the new brand image.
Further exacerbating the situation, China’s luxury market has weaken. “The consumer environment has momentarily deteriorated for the luxury industry” in China, the company Chief Financial Officer Jean-Marc Duplaix tells The Wall Street Journal.
The brand also tightened its distribution, which has hurt European sales. “We have stopped working with certain distributors in Italy in order to conserve the exclusivity of the brand,” said Mr. Duplaix. Gucci missed “because of the need to streamline wholesale,” Luca Solca, an analyst with BNP Paribas, tells Bloomberg.
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