Gucci generates 35.2% revenue growth for Kering
Jhe House of Gucci ended 2021 with a bang, propelling Kering’s earnings to 17.7 billion euros ($20.1 billion), up 35.2% from a year earlier.
The biggest fashion brand in luxury empire Kering – which includes Yves Saint Laurent and Bottega Veneta – Gucci posted 9.7 billion euros ($11.02 billion) in sales, up by 31.2% compared to 2020, exceeding pre-pandemic levels. The launch of Gucci’s Aria collection in September, followed by the buzzing release of the Gucci House film in November helped fuel fourth-quarter performance, which was up 32% year-over-year. But consumer appetite post-pandemic was probably the most important factor.
“At the end of the day, people felt frugal fatigue and couldn’t shop during the worst of the pandemic,” says Hitha Herzog, director of research at H Squared, “not just for luxury but for retail. detail at all levels.
In its 2021 earnings report, Kering noted that the first six months of the pandemic profoundly disrupted global sales as well as tourism-driven in-store traffic, causing business to drop nearly 18% in 2020. But last year, its brands began to see a turnaround as consumers were eager to buy luxury goods again.
Gucci wasn’t the only good player in Kering’s portfolio. “All our Houses achieved a strong rebound in their sales,” said François-Henri Pinault, CEO of Kering, “well beyond their 2019 levels while strengthening the exclusivity of their distribution and further strengthening their capital Mark”.
Yves Saint Laurent’s revenue reached 2.5 billion euros ($2.8 billion) last year, a 45% jump from 2020. Like Gucci, its fourth quarter was the most strong, with an increase of more than 60%. Bottega Veneta, Kering’s only fashion division that saw growth at the height of the pandemic in 2020, continued its upward momentum. The Italian fashion business grew 24% in 2021.
The “Autres Maisons” of the French conglomerate also delivered for Kering. Sales of Balenciaga, Alexander McQueen and French jewelry house Boucheron surged across the board.
As for inflation issues – earlier this week Louis Vuitton announced it was raising prices globally to offset costs – Pinault said in an interview with CNBC that price increases will be assessed on a case-by-case basis before each collection launch. But he added that the average price of Kering’s products will likely rise due to rising costs, import duties and the foreign exchange market.
Jean-Marc Duplaix, Chief Financial Officer of Kering, said: “Regardless of the increase in inflation of certain raw materials, I believe that our brands are able to reflect this price increase”, given that its brands saw only low to mid-single-digit price increases in 2020 and 2021. He added that Gucci clearly has “pricing power.”
“Everyone keeps talking about these luxury price hikes like they’re disastrous, but in the end, who cares?” said Herzog. “Nobody buys Balenciaga for a discount, these buyers are largely immune to the price.”
Sarah Davis, founder of luxury resale site Fashionphile, points out that this trend is not new either. “Hermès, Louis Vuitton, Gucci and Chanel have been raising prices for the same styles since the 1980s,” she says. Historically, the prices of luxury handbags and accessories have increased by 2-4% and 7-10% respectively each year. But she notes that the percentage increase and the frequency of price increases have increased in 2021.
News of Kering’s earnings sent the company’s share price up 7.9% on Thursday.