“Weakness in Asia has been a recurring leitmotiv of the recent updates as Chinese consumers have moved from ecstatic excitement about Gucci in the early period of the Alessandro Michele revolution, to a satiated attitude as Alessandro Michele became yesterday’s story,” writes Bernstein analyst Luca Solca. “The jury is out on whether the Chinese will like the Sabato De Sarno quiet luxury.”
“The bad news on Kering is company specific, but is also a good reminder that consumer confidence and discretionary spend in China is soft,” Solca adds.
“The market environment is not easy and you should expect a strong polarisation in the performance of the brands,” says Mario Ortelli, managing director of Ortelli & Co. “Brands with good momentum and a loyal affluent client base will continue to perform well, while brands that are undergoing a creative transition and are exposed to more aspirational customers will suffer.”
Kering has laid out a strategy to lure high-net-worth individuals across its brands. Gucci, for instance, has been pursuing its “elevation” strategy with the rollout of Gucci Salons dedicated to very high-end offerings. During its media conference in February, Kering chairman and CEO François-Henri Pinault said: “We are a group that has firepower with aspirational clientele and consequently the more sophisticated, mature segment is less developed than for some competitors who are positioned in timeless [luxury].”
Kering will release its full Q1 earnings report on 23 April.
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