Kering Posts Record First-Half as Gucci Woos Chinese Millennials

Gucci’s creative revamp, a source of inspiration for the global fashion industry, has paid off yet again. A 43.4 percent rise in comparable sales in the first half helped its parent company, Kering, deliver a record-breaking performance in the first half of 2017. The French luxury group beat first half estimates with comparable revenue up 26.5 percent year-on-year on the back of healthy demand for luxury in mainland China and Western Europe.

Kering’s success was also guided by the significant sales growth from its other fashion brands, including Yves Saint Laurent, which witnessed a 28.5 percent growth during the first half, as well as its sports brand Puma, which delivered a 15.7 percent growth in comparable sales for the first six months of 2017. But Gucci was a particular star as it makes up over half of Kering’s profit—the Italian fashion house’s second-quarter results were strong, with a 39.3 percent growth, which surpassed analysts’ predictions of 32 percent growth.

In Western Europe, where Chinese tourists have been returning in droves since the beginning of this year, this comparable sales growth in the first half was at 66.2 percent for Gucci. The brand witnessed the second-biggest growth in half-year sales in the Asia Pacific region at 51 percent, with mainland China witnessing a 50 percent growth in revenue.

In a sign that strong sales could continue in mainland China, Gucci made its official China website into an e-commerce portal for Chinese consumers earlier this month. The new site intertwines creative content marketing with online shopping, letting customers use Chinese payment systems like WeChat and Alipay. The brand launched its e-commerce platform in other key markets in the first half of this year, and online sales skyrocketed by over 60 percent during this period.

The transformation that has famously driven Gucci’s success story, led by creative director Alessandro Michele, has had a heavy digital presence this year overall as the brand works to target millennial, tech-savvy shoppers. This has been especially apparent in China with the launch of offline events driven by social media participation, such as its Blind for Love exhibition that introduced Alessandro Michele’s creative vision to aspiring, young luxury consumers.

The event took place in key cities across Asia and encouraged participants to post about the brand on WeChat and Weibo. Digital intelligence firm L2 ranked Gucci as being among the top five digital performers in China thanks to social media engagement activities like this one.

Millennials are a known critical market for luxury brands in China, given their spending power, but this group is paying off for Kering’s global performance as well. Kering chief Francois-Henri Pinault told CNBC in an interview that “Gucci is selling 50 percent of all sales to these people…Saint Laurent 65 percent of the turnover is made with millennials. It means that we have a core category of customers that are between 25 and 35…The attractiveness of couture, of the ready to wear is much higher for that clientele than it used to be for older people before.”

Other luxury brands have been reporting favorable results in the first half of 2017 as spending increased in mainland China this year. Luxury fashion house Hermès also posted positive sales growth in the first half, partly thanks to a 14 percent rise in revenue in the Asia-Pacific region, thanks to robust demand in mainland China and a 7 percent increase in Europe driven by a tourism rebound.

Categories

Market Trends, Retail