Kering has shared its annual results for 2016 and, unsurprisingly, Gucci is the star.
“Gucci has returned to growth,” said Kering group managing director Jean-Francois Palus during the results presentation. The brand has been undergoing a restructuring that began in January 2015 under then-newly appointed creative director Alessandro Michele.
“In 2015, Gucci recreated the dream,” Palus continued. “That dream was actually realized in 2016. In 2017, this will become a sustainable reality and a strong growth driver. The unprecedented speed of Gucci’s reinvention are a textbook case for a restructuring.”
Gucci has been long been lauded as the luxury market’s current success story, and Kering’s 2016 numbers support such a narrative. The brand’s year-over-year comparable revenue rose 12.7 percent to $4.5 billion. In the fourth quarter alone, revenue rose 21.4 percent, to $1.45 billion.
Overall, Kering net profits jumped 16.9 percent to $900 million. The year was Kering’s best, financially, since 2012, with growth at non-Gucci brands including YSL.
Kering’s eyes are on Gucci, though, at nearly four times the size of Yves Saint Laurent. Here’s a breakdown of the brands’ recipe for a successful restructuring.
Support a strong creative designer and CEO duo.
The positive relationship between Gucci CEO Marco Bizzarri and designer Michele has proven integral to the brand’s success. Bizzarri picked Michele, who wasn’t in talks to take over from former creative director Frida Giannini in 2014, out of the Gucci accessories department, the one sector of the brand posting positive results at the time (in the final quarter of 2014, Gucci sales were down 0.5 percent). Bizzarri gave him free range to take creative risks in order to push the brand forward.
“The model most likely to succeed for a luxury brand is when you have an excellent creative director, plus an excellent head of merchandising, plus a strong CEO — that’s Gucci today,” said Luca Solca, head of global luxury goods at Exane BNP Paribas.
Internally at Kering, this relationship is carefully tended to at Gucci and across other brands.
“The match between creative and manager is a main responsibility, and something I look after every day,” said Kering CEO Francois-Henri Pinault.
Palus built on that sentiment, adding: “Alessandro’s creativity and Marco’s talent created energy in the organization that caused a true upheaval in the corporate culture, making it innovative, receptive, light-footed and better performing.”
Cater to the new generation of luxury shoppers.
Millennials are driving growth at Gucci, and the company is attributing the surge in interest to several things: the brand’s GucciGhost capsule collection, Instagram and Snapchat initiatives anchored by the #Guccigram and #24hourAce hashtags, the Gucci and 23 Stories video collaborations, and the 100 Ways to Wear Gucci content collaboration with Vogue.
In the fourth quarter of 2016, sales from those in the 18-to-34 age group jumped by 70 percent. As a result, millennials now make up half of Gucci’s total revenue.
“Consumers’ consumption patterns are changing completely,” said Pinault. “We have a modern vision of luxury based on strong creative content and codes that will last over time. Tomorrow’s luxury isn’t based on heritage and artisanal excellence. There must be creativity. And creativity’s not good enough. The implementation must be right.”
Improve the Gucci store experience, in boutique and online.
Gucci-owned store sales grew 14.8 percent last year, while e-commerce sales jumped 19 percent. According to Palus, this was due to the decision to remodel stores and the e-commerce site to align with Michele’s aesthetic. Additional features, like DIY bag design in stores and reserve-online-ship-to-store functions on e-commerce, were rolled out as well. As a result, sales per square meter jumped 15 percent.
In the year ahead, Gucci plans to launch e-commerce in China and focus on remodeling storefronts in Japan, the only region where annual sales were not up.
“Aspirational brands should sell emotion that makes us want to emulate them and buy their product,” said Ian Schatzenberg, CEO of the agency Wednesday. “Only once that’s established, and you’ve landed a way of interacting with the world through your brand, then is it really about channel planning. Gucci’s channels represent the current brand perfectly.”