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Unstoppable Gucci
Economy

Unstoppable Gucci

Monday, 12 November 2018
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Christophe Roulet
Editor-in-chief, HH Journal

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5 min read

A struggling brand in 2015, in the past two years Gucci has seen exponential growth in the region of 40%. This extraordinary performance owes much to creative director Alessandro Michele, the man behind today’s baroque, ethical and connected Gucci. Millennials love it.

Inside a clinical, operating-theatre space, models descend the runway with their own severed head under their arm, like martyred saints in some televisual dystopia. In Alyscamps, near Arles in the south of France, a Roman necropolis becomes the apocalyptic setting for the 2019 Cruise collection. Today’s Gucci is all this and more: a grandiloquent, baroque world unto itself, accessories included; a go-your-own-way attitude; gender-inclusivity and accessibility, crowned with a hint of flamboyance. It’s a potent potion, easily written off as yet another attempt to uncover the philosopher’s stone. Which it isn’t, or else the philosopher’s stone really does exist in which case Gucci has found the formula.

Soon the N°1 luxury brand

The numbers speak for themselves. Bagged by Kering in the late 1990s after an epic legal battle against LVMH, in 2015 Gucci’s sales were haemorrhaging and the Italian firm was treading water. French daily Le Monde even described the brand as a “millstone” for its new owner, who preferred the term “transition” to describe its flagging performance. And a transitional year it was. New blood was injected into the firm in January in the persons of Alessandro Michele as creative director and Marco Bizzari as CEO. The following year, the brand reported a 12.7% rise in organic sales – and this was just the beginning. In 2017, revenue shot up to €6.2 billion, an astounding 44.6% increase. Even more incredibly, Gucci succeeded in sustaining this exponential growth rate over the first half of 2018. Even the slight dip to 35.1% between July and September has to be seen in the light of a negative base effect, after sales swelled by 49% for the third quarter of 2017.

In 2017, Gucci's revenue shot up to €6.2 billion, an astounding 44.6% increase.

Extrapolating these numbers gives Gucci revenue in the region of €8.5 billion for 2018 as a whole. This is grist to the mill of Chief Executive Marco Bizzarri, who says the brand is now at a stage where it can overtake Louis Vuitton in the race to reach €10 billion in revenue and clinch first place on the luxury brand podium. There are, of course, some serious contenders for the crown, starting with Chanel and its €8.3 billion in sales in 2017 (+11%) and of course Vuitton, estimated at €9 billion. But Gucci clearly has the advantage, growing twice as fast as its direct competitors. If the Italian brand carries on at this rate, it could reach its objective before 2020 with an astronomical 40% operating margin (compared with 35% today). In the luxury segment, only Hermès can top that figure.

Millennial appeal

Gucci is a textbook case of a brand that has turned its fortunes around. It’s worth remembering that only two years ago, in 2016, leathergoods still took up 55% of sales. Then Alessandro Michele worked his magic. Michele joined Gucci in 2002, and in 2011 was made associate designer to creative director Frida Giannini, stepping into the breach four years later when she was ousted. He took it upon himself to reinvent the Gucci look with sufficient intelligence to win new audiences without alienating the brand’s longstanding admirers. He has imposed his flamboyant style, successfully, across all the ranges, including the watch division which is estimated at an impressive 500,000 pieces per year. Not that the brand has any intention of following in the footsteps of Chanel, say, or Vuitton, who are now playing in the Haute Horlogerie field; Gucci is a fashion brand and as such its watch collections are scheduled to coincide with the year’s runway shows. Considering lead times in the industry, this is no mean feat.

Alessandro Michele has imposed his flamboyant style, successfully, across all Gucci's ranges.

With his Jesus Christ Superstar hair and beard, Alessandro Michele is a compelling figure who uses his aura to impose unorthodox ad campaigns that are far removed from the glossy fashion world, to organise radical and acclaimed runway shows, or team up with maverick personalities such as Harlem tailor and hip-hop favourite Dapper Dan, or the actor-director-singer Jared Leto. At 46, the Italian designer knows how to talk to younger shoppers, who talk back. Millennials represent more than 50% of Gucci’s customers, and it’s this connected generation that are behind the explosion in online sales, which surged 80% in 2017 and 70% this year. The brand has also aligned itself with the values that count for millennials and their cohorts. Whereas Burberry chose to burn US$40 million of unsold merchandise in order to protect its brand image, the Florentine firm is rolling out Gucci Equilibrium, a culture of purpose to support social and environmental responsibility, empower employees and drive innovation. This strategy is set out in detail on a dedicated website where anyone can monitor the brand’s progress towards these goals. So, is Gucci poised to become the world’s number-one luxury brand? It’s certainly looking that way.

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