Kering needs a “second Gucci”. According to analysts, the French group is too dependent on its flagship brand. If it wants to grow while maintaining its scale economies, they observe, it will have to gear up to find a new engine. To stay in the wake of LVMH, which, with Tiffany, has a third growth engine in addition to Louis Vuitton and Dior, Kering therefore has two options: it either invests heavily in the growth of one of the brands it already has in its portfolio, or it finalises an acquisition of a certain depth.
A second Gucci
Luca Solca (Bernstein) says that while performance in the first quarter of 2021 has eased the concerns of some investors, Kering is still lagging behind LVMH. Gucci, which generates 60% of Kering’s revenues and 80% of its profits, has certainly recovered. But the brand appears even slower than several competitors, despite having implemented various strategies to maintain its momentum, such as the collaboration with Balenciaga. Some analysts, according to ladymax.cn, do not appreciate the initiative: only the weak, they object, need to group together. From their point of view, Gucci would have sought help from a smaller brand to regain momentum.
Who is in
Speaking of internal resources, the group thoroughly explores the potential of its brands. Saint Laurent, Bottega Veneta and Balenciaga are growing strong. Kering is trying to change its strategy: not to apply the same formula for all brands, but to leave each brand the freedom to develop its own.
Who is out
At the same time, Kering would also be looking around. As Business of Fashion recalls, the French group tried to buy Versace, but its offer was surpassed by that of Michael Kors. It would then have tested waters for Moncler, Prada and Dolce & Gabbana. And finally, it would submit a (rejected) offer to Richemont. The problem, according to analysts, is that Kering seems to apply its “financial discipline” with extreme rigidity and fails to seize opportunities. For its part, Kering rejects pressure, does not want to be in a hurry and is confident in its brands: “confident in the ability of our homes to grow in 2021 and beyond”, said Chief Financial Officer Jean-Marc Duplaix.
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