Gucci starts 2017 with a bang

On Wednesday, Kering shares were the highest flyers on the Paris stock exchange: at 5.24 pm CET the price was up 9.43% to €283.60, while the CAC40 share index was rising by 0.29% only. The day before, the world number two luxury group reported a record first quarter, with a revenue of €3.75 billion (+28.6% in like-for-like terms), driven by an extraordinary performance by Gucci.

Under the aegis of Creative Director Alessandro Michele, Gucci is increasingly taking on the mantle of Kering's leading label, accounting for more than half of the group's luxury division's sales (€2.41 billion) and being its chief source of profits. Sales for the Italian luxury label managed by Marco Bizzarri skyrocketed to €1.354 billion in the period, posting a 51.4% increase (+48.3% at constant exchange rates), its highest quarterly growth rate in the last 20 years.

The majority of financial analysts have saluted this "exceptional" performance, which vastly exceeded their expectations. "We are ahead of schedule compared to the objectives we set ourselves for Gucci," said the group's CFO Jean-Marc Duplaix in a conference call. The brand still has untapped capacity in terms of productivity, but already in 2017 it can expect to see its operational margin reach, or even exceed, 30%.

The Florentine label has "significant growth potential, enough to enable it to outperform the market in 2017," added Duplaix, who is confident Gucci will continue on the current track, even though its growth is expected to "normalise" in the coming quarters. The benchmark for comparison was indeed favourable for the first quarter 2017, since the first quarter 2016 was very weak, due to the impact the November 2015 terrorist attacks had on tourist visits to Paris.

Like Kering's other brands, and their competitors, Gucci has benefited from the luxury goods market's recovery, driven by a rebound in European tourism and rising demand in China.

Taking into account Gucci's 517 directly owned stores only, which produce 82% of the label's total revenue, their comparable sales have leaped 51.4%. The label posted record growth across all product categories, notably in ready-to-wear and footwear, while geographically the leaders were Asia-Pacific (+63.1%) and Western Europe (+66.4%).

As for the label's online sales, they too have soared, rising 86% on the back of record increases in North America and Western Europe.

The therapy administered by Alessandro Michele since 2015 continues to be effective for Gucci, thanks to a radical style shift encompassed in the designer's oneiric mood and ebullient creativity, resulting in a clear new image, systematically applied across Gucci's collections. An image that will be further strengthened by the very first fragrance created by Michele, whose launch is planned for the second half of 2017.

Further strings to Gucci's bow will be added thanks to the first eyeglasses collections created internally by Kering Eyewear. Also planned for this year, the launch of Gucci's e-tailing in China and a make-over of several of the label's stores.

Gucci starts 2017 with a bang

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