The long-established powerhouse of Kering’s luxury goods division, Gucci, is having a tough time of it recently as sales have been trending lower in the increasingly slow global luxury market. A deliberate revival effort is needed to revive the Gucci brand because it contributes so much to Kering’s sales and operational profitability.

Author Eric Briones of Luxe et Digital voiced his worry about Kering’s over-reliance on one brand, drawing attention to the dangers that come with it. Half of Kering’s revenue and two-thirds of its operating profitability come from Gucci, the fashion house famous for its signature python bags and belts. On the other hand, according to Kering’s predictions for the first quarter of 2024, sales at Gucci are likely to fall by about 20%, while the entire group is estimated to see a 10% decline.

Competitors, like as LVMH, on the other hand, have dynamic portfolios that include numerous profitable brands. Aiming to build five driving brands within the next five years is LVMH’s roadmap, as pointed out by Briones. Prada, an Italian competitor, is also aggressively growing its Miu Miu label.

It’s not easy for Gucci to cater to its Asian and “aspirational” customers, especially the younger generation that loves fashionable things. The slow rebound of the Asian luxury sector after COVID-19 and the effects of inflation on ambitious consumers make things even more difficult for Gucci.

In 2019, Gucci responded by aiming for a more discerning and wealthy demographic with a “upscaling” strategy. The CEO of the luxury group, François-Henri Pinault, stressed the significance of this change in approach.

The elevation method, according to Julie El Ghouzzi of The Luxury Manual, is conceptually solid because it centers on making iconic, classic pieces with a modern twist. But she stresses how important it is to make a big deal about the brand’s story in order to make it more legendary.

Kering has reorganised Gucci’s leadership with the appointment of Jean-François Palus as CEO and the promotion of Stefano Cantino to the position of deputy CEO to back up this strategy shift. The goal of these high-level hires is to reinvigorate the Gucci brand and rethink the company’s future.

The continued strategic initiatives at Gucci should provide excellent results, therefore HSBC is confident about the company’s future despite the hurdles. Bigger sales increases, though, might not show up until the year’s end.