Breaking News | Gucci sales growth disappoints


News flashes have been coming in today from investment analysts covering PPR, which reported its 1Q08 results earlier today. The news is not good for the Gucci brand, but Bottega Veneta has managed to beat market expectations, even in this downbeat economic environment.

Gucci sales only increased by 2.4% to €513m, versus market expectations in the neighbourhood of 7% growth. As a result, some analysts are considering posting downgrades to their ratings on the PPR stock. Given it’s self-stated positioning as an ‘Aspirational luxury’ brand, it may not seem surprising that Gucci would be one of the first brands to show signs of the economic slowdown.

But that’s not the whole story.

Interestingly, the slowdown in sales growth is not coming from the US market, but rather from Japan and Europe. This is more complex than it seems, however, because the US numbers may have been boosted by increased international tourism (as a result of the low US dollar), while the Italian numbers may have decreased due to lower tourism from Japan, which in the past has been a key driver of sales in Italy.

Here’s what the analysts are saying:

PPR: 1Q08 sales highlighted by big miss at Gucci – Buy rating under review: By region, the weak areas were Japan and rather surprisingly Europe, both of which were negative in comparable terms. We believe Gucci is losing market share in Japan, where the luxury market overall is in decline, which is exacerbating the impact vs the likes of Louis Vuitton or Hermes, for example. We are   reviewing our rating and look forward to further feedback on the conference   call this afternoon before coming to any conclusions – Lisa Rachal, Redburn Partners

PPR: 1Q08 Results: Loss of Altitude at Gucci: The key point of this update seems to be slower growth at the Gucci brand.  We believe that weaker than expected performance could be driven by a number of factors, including softer performance in the US wholesale channel, relatively lower exposure to emerging markets than rivals such as LVMH, as well as continued weakness in Japan. - Luca Solca, Sanford C. Bernstein & Co.

There was also some good news, however, for the PPR luxury division. Bottega Veneta is on a tear, with sales jumping 31.5%, beating most analyst expectations. YSL also fared well with +20% growth, despite a tough comparable.

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  1. There’s a lot of pressure on Frida Giannini. Will she be pushed out now? Gucci’s “sexy” edge has certainly diminished under her direction but last season sales were up. Does the European and Japanese market find her designs less desireable?

    modaRhoda from Motherwell, North Lanarkshire, United Kingdom
  2. I have to say i saw this coming. I have been a HUGE supporter of Frida… especially of her inaugural collections including accessories….It was vibrant, feminine, sexy in a refreshing departure from the Ford Era which in itself was a tough act to follow…but the last few seasons have been lackluster…..the luxury aspect seems to have faded….They could also be stronger with the visuals (visual merchandising & advertising)Used to be that the windows and advertising would make u stop and take another look…..and yes even covet the delicious merchandise…The color, design and overall execution was pedestrian this time out…. I dont know the intimate details of whats going on at Gucci HQ but someone needs to reign it in before it gets to Pre-Ford status

  3. surprise surprise – it was pretty clear that the “emerged” markets would not respond well to the emerging market stuff gucci has been churning out of late. it’s become such a tacky brand. they say it’s because they have been focusing too much on the top end of the pyramid. well, if they want a top end consumer they need to make their entry level products less tacky!! and their solution is apparently to refocus on that monogram canvas that was counterfeited to high heaven?? the mind boggles!!

    Caricouture from Galway, Galway, Ireland
  4. Getting started in the fashion businesS If ESTABLISHED designers continue to rip off designers struggling to be seen, For instance bottega veneta has blatently ripped me off, and i will be suing them for breach of copy write, I am sick and tired of getting ripped by these people who call themselves designers all they are, are style thieves, who steal on the ground level where the real new ideas come from in British markets, London 6 months before fashion they all come out like termites, I am probably the most ripped off designer in the world, and it stops now, starting with bottega veneta, that assymetrric shoulder is my trade mark i want reperations, I am already suing TOPSHOP for breach of contract, you are nothing.

    theodora anagor from London, London, United Kingdom