Mid-February, Kering’s share price tumbled by almost 10% on the Paris stock exchange after 2020 results fell short of expectations. Unlike the other big luxury groups, the French multinational led by François-Henri Pinault failed to benefit from the fourth-quarter rebound that was especially solid in Asia, where Kering’s competitors have enjoyed strong growth. The group’s 2020 financial year ended with a 16.4% slump in revenue to €13.10 billion after fourth-quarter sales dropped by 5%. The news was not well-received by investors, prompting a fall in the price of Kering stock. Most of the concerns were over the group’s marquee label, Gucci. The Italian brand accounts for 60% of the group’s revenue and makes up 80% of its profit. And 2020 was not a good year for Gucci.
The brand reported a 23.2% contraction in 2020 revenue to €7.40 billion which it wasn’t able to offset in the fourth quarter, when sales fell by 10.3%. By way of comparison, its closest rival, Louis Vuitton, saw revenue fall by just 3% for the full year 2020 and succeeded in staying above the €13 billion mark. Gucci took a hit when international tourism dried up during last year’s lockdowns, and proved unable to reverse this trend and match the excellent results of previous years. Between 2015, when Alessandra Michele took over as creative director, and 2019 Gucci’s sales rocketed from €3.90 billion to €9.60 billion, climbing 40% per year (even more in 2017 and 2018). Needless to say, 2020 put a damper on things.
Hoping to reassure financial markets, earlier this year Kering presented its roadmap to boost the label, which celebrates its centenary this year. This includes an e-commerce drive (Gucci joined the Tmall Luxury Pavilion platform at end 2020) and more collaborations in the wake of the massively successful partnership, last December, with The North Face. The brand is also reviewing its calendar of runway shows which will take place outside Fashion Weeks and is planning a stream of events and pop-up stores, with 600 physical and digital events scheduled in China alone. The brand will also dial down its baroque aesthetic in favour of inspirations that are more likely to appeal to customers older than its loyal following of Gen-Zers and Millennials.
This was the context for the unveiling by Gucci of its Haute Horlogerie collection, aimed at a wealthier demographic with an entry-level price point of CHF 10,000 (€8,500). The move mirrors the Italian firm’s incursion into High Jewellery in 2019. Gucci is certainly no newcomer to the watch segment: it was the first fashion label to launch watches as a contemporary accessory in 1972, all of them made in Switzerland where, over the past fifty years, it has built up production capacity. Gucci Watches is headquartered in Neuchâtel where it also has its design studios. Assembly, gem-setting and quality control are based in La Chaux-de-Fonds, with a second plant in Ticino specialising in dials and decoration.
The four Haute Horlogerie lines are Gucci 25H, G-Timeless, Grip, and a high jewellery line, all helmed by Alessandro Michele. And to show it means business, the brand has unveiled the first calibre to come out of Kering’s movement manufacturing facilities in La Chaux-de-Fonds: the GG727.25 with automatic winding. At 3.70mm high, it equips ultra-thin models in the 25H range of sleek and sporty watches with an integrated bracelet. And there is more: Gucci is also debuting tourbillons in the 25H and G-Timeless lines, hardstone dials, moon phases and models with jumping hours and dragging minutes in the Grip line, including a version with a sapphire case in a choice of four colours. Not forgetting the high jewellery line.
Gucci clearly has its sights set high and is giving itself the means to achieve its ambitions. In the wake of organic growth of 25% for the brand in the first quarter 2021, Kering stock has gained 27% over the past three months. One way to wish the brand a happy 100th birthday.