Gucci, once the powerhouse of Kering’s portfolio, is facing one of its most significant challenges in years. The brand’s 26% sales decline for Q3 2024 has had a profound impact on Kering, contributing to a broader 15% drop in revenue to €3.8 billion ($4.1 billion). This downturn underscores the difficulties facing the entire luxury market, with Gucci struggling in China, Japan, North America, and Western Europe.
The shifting dynamics are clear: Gucci’s reliance on travel retail and entry-level luxury items, such as sneakers and mini-bags, has failed to compensate for sluggish demand for its high-end collections. But the bigger question remains: Why is Gucci faltering in such a competitive market?
The struggles have been amplified by Gucci’s attempt to reinvent itself creatively. Under Sabato De Sarno, who took over as creative director in 2023, the brand moved away from Alessandro Michele’s bold, maximalist style and embraced a more understated, sartorial aesthetic. This shift aimed to appeal to a broader luxury audience, but has not yet produced the kind of excitement needed to drive strong sales.
And now, with De Sarno’s departure confirmed, Gucci faces yet another transition. The design studio will take the reins for the upcoming collection, leaving the brand at a critical juncture: how will Gucci balance commercial appeal with staying true to its identity in a rapidly shifting market?
The struggles of Gucci are also casting a shadow over Kering’s broader portfolio. While Bottega Veneta stood out with a 4% revenue increase, largely driven by strong growth in North America and Europe, the group’s other brands are facing similar headwinds. Kering’s overdependence on Gucci as a primary growth driver has become a serious vulnerability, especially as the brand’s sales stagnate in key regions.
The downturn in China—where Gucci has historically relied heavily on consumer demand—was a key factor in the brand’s drop, with retail revenue in the region falling by 25%. This overreliance on a single market, paired with slowing demand across other regions, underscores the risks for Kering if Gucci cannot regain its footing.
Meanwhile, Hermès has continued to thrive, reporting a 10% sales increase for Q3 and a 11% rise in nine-month revenue, reaching €11.2 billion ($12 billion). Despite a slight slowdown in Greater China, Hermès has experienced strong gains in Korea, Singapore, and Australia, demonstrating the effectiveness of its more diversified global strategy.
Where Gucci’s heavy reliance on China has proven risky, Hermès’ ability to navigate a range of markets—bolstered by a commitment to craftsmanship and exclusivity—has allowed the brand to weather economic turbulence. Even in the face of economic uncertainty, Hermès’ approach is proving far more resilient, as the brand capitalizes on steady demand in regions beyond China.
Gucci isn’t the only luxury brand facing challenges—Burberry is also experiencing declining sales and a drop in brand appeal since the pandemic. Watch our video below to see how they are adapting to the new economic climate.
As Kering navigates a challenging period for Gucci, the next steps will be critical. The brand must rethink its market strategy and address both brand identity and financial performance to remain competitive. Gucci’s struggles highlight the risks of relying too heavily on a single market and the importance of diversification in the luxury sector.
Can Gucci regain its dominance, or will it continue to lose ground to more diversified players like Hermès? Only time will tell—but for now, Gucci’s next move will be one of the most closely watched in the luxury industry.
