And with the house's plans to push into cosmetics this year, they'll probably buy a lot more.
It's only Tuesday, but it's already been a very long week for execs at Gucci. In the midst of dealing with a scandal with the potential to alienate much of its customer base, Gucci's parent company Kering released its annual earnings report for 2018. Fortunately for them, things were pretty positive and strong on the financial front, and Gucci, as usual, had a lot to do with that.
Overall, Kering saw comparable sales increase 29.4 percent over last year to about €13.7 billion or $15.5 billion. "Once again, we significantly outperformed our sector," said CEO François-Henri Pinault in a statement.
The majority of that came from Gucci, whose sales topped €8 billion for the first time (meaning it's catching up to Chanel) at a growth of 36.9 percent. That growth came from all product categories (with leather goods, i.e. handbags, making up the greatest portion), all regions (primarily China — defying industry-wide fears of a slowdown in this market) and even all age ranges. In fact, millennials (defined as those under 35) made up the majority — 62 percent — of Gucci's sales last year. Pinault emphasized during the earnings webcast that this group has the same retention rates (meaning they repeatedly make purchases) and ticket prices (the amount they spend per shopping trip) as older groups. Clearly, its status as the hottest fashion brand in the world did translate into sales.
Still, Gucci isn't resting on its laurels: In addition to continuing to renovate many of its stores, the brand plans to boost certain categories where it sees potential, such as beauty. In addition to fragrances, of which the brand launched several recently, Gucci will make a bigger push into cosmetics, confirming our hunch back in September when the brand launched a new beauty Instagram account. It's another category that those Gucci-hungry millennials will very likely latch onto, especially considering it's an accessible one.
Outside of Gucci, sales remained strong at Saint Laurent (up about 19 percent for the year); and while Kering doesn't reveal numbers for Balenciaga or Alexander McQueen, it said that both of them experienced "stellar performances." Sales at Bottega Veneta, however, continued to decline: They were down 3.4 percent on a comparable basis with Kering emphasizing that the response to the first designs by new creative director Daniel Lee for Pre-Fall 2019 was "very encouraging." Lee will have his first show this coming Milan Fashion Week.
Across brands, Kering is focusing on beefing up technology to improve e-commerce experience, omnichannel capabilities and customer relationships. It even tested out an artificial intelligence feature for retail with Gucci that showed an algorithm to be twice as effective as human sales associates at identifying high-potential customers and getting them to buy more.
Barring any additional racist snafus and PR disasters, and assuming it sufficiently puts out its current fire, Kering seems poised for a successful 2019 with Gucci — as Pinault literally called it — as its "backbone."