Kering Looks To China To Grow Gucci Sales

Words by Romana Hai

Kering Sets Plan To Boost Gucci Brand In China
Kering Sets Plan To Boost Gucci Brand In China
Gucci’s parent company, Kering, is looking to China for a boost in sales as the country eases its strict lockdowns and consumers make a careful return to shopping in physical stores.

China, which is set to become the biggest luxury market globally by 2025, already plays an outsized role in the company’s business, accounting for more than half of its total revenue.

To bring its plan to life, Kering has recruited former Tiffany executive Laurent Cathala to run Chinese operations for Gucci.

Analysts expect Cathala’s appointment to bring greater support to local teams, giving them control of marketing and advertising activities. The move is rather unusual as Europe-based executives in Paris or Milan typically dictate strategy.

While the move is far from the norm, it will likely be empowering for local market teams as they are likely to have a better understanding of their customers and culture.

Since the beginning of 2022, Kering shares have fallen 26% compared to rival LVMH, which has seen a decline of 16%. Chief financial officer (CFO) Jean-Marc Duplaix believes Gucci’s underperformance is partly due to the brand’s increased exposure to volatility in the Chinese market compared to other luxury brands.

Another factor that has proven detrimental to the company’s growth is the decline in business from Chinese tourists, who often traveled to Europe to scoop up the latest designs made by creative director Alessandro Michele.

In fact, Chinese shoppers played a significant role in fueling growth between 2015 and 2019, when the company saw its profits soar by four times and its revenue by three times.

While the company is looking to once again lean in on China to bolster its profits, analysts are not expecting a quick return. In fact, they expect luxury sales to drop 15% in the country before seeing any growth.

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