Luxury fashion house Kering’s total revenue bounced back to EUR3.890bn (US$4.68bn) in Q1 FY2021, an increase of EUR686.8m on the year, and impressively, EUR104.7m on Q1 FY2019, proving its appeal among shoppers despite the ongoing impacts of Covid-19 on consumer demand for fashion.
Core brand Gucci dragged Kering’s performance down in FY2020 as desire for its heavily branded styles weakened, and despite a significant improvement in its performance in Q1, sales for the brand remained 6.8% behind the same period in 2019. Kering’s 21.4% increase in total revenue also somewhat pales in comparison to the 31.7% growth at rival LVMH across the same period, so it must continue to focus on increasing Gucci’s relevance, as understated fashion is likely to remain the preference in the short term.
Western Europe will have continued to be a hindrance to Kering in Q1 2021, as lockdowns have been reintroduced across most of the region and consumer confidence remains low, with demand for luxury goods likely to remain muted in the short term. Though the UK’s reopening of shops and resurgence of social activities will provide some solace for Kering in Q2, a lack of tourism will hold back luxury spend in the market, and even when this resumes, the scrapping of tax-free shopping for international visitors will have a huge impact.
APAC and North America both performed well in Q1, with 83% and 46% growth respectively, though both regions will have been in decline in the comparative period in 2020. The group would be wise to focus on maximising its appeal in China in particular, where demand for luxury is high, by partnering with local influencers and introducing country-specific limited edition collections.
Kering’s online sales grew by an impressive 108%, but digital revenue still only made up 14% of total sales. Though online penetration is often lower among luxury brands due to the greater importance of the in-store experience, Kering must continue to invest in its online platforms, especially in China where consumers are used to interacting heavily with brands online, such as through WeChat.
The group’s new logistics hub, that will be fully operational by the end of Q2 2021, will help support online growth; and initiatives such as virtual showroom appointments, which Gucci and Bottega Veneta already offer, should be rolled out across all of its brands to ensure it provides a personalised luxury experience that will resonate with its shoppers and boost digital spending.