At the newly opened Gucci Artlab, for a Kering investor day Marco Bizzarri, CEO of Gucci, announced the cash cow’s plan to become the largest luxury brand in the world. The brand bolstered a record of annual sales of €6.2 billion euros (approximately $7.1 billion dollars) under Bizzarri and creative director, Alessandro Michele.
According to the New York Times, Bizzarri states that the meeting, regarding this monumental endeavor: “It’s not a question of if,” he said, “but when.”
By 2019, Gucci plans to reach €10 billion dollars in annual sales and a 40% operating profit margin. With this announcement, Kering’s M&A strategy increasingly becomes clear. Recently, the parent group has streamlined its portfolio. Over the past year, it sold its shares of previously acquired brands such as Puma, Stella McCartney, and, most recently, Christopher Kane.
Now, the luxury group’s focus is on its five core brands: Gucci, Saint Laurent, Balenciaga, Alexander McQueen, and Bottega Veneta of which the former three make up the majority of the firm’s revenue.
So, is Kering place of its bets on their strategic shortlist of brands or is the luxury group gathering the materials together for new merger or acquisition?
Luca Solca, head of luxury goods research at Exane BNP Partners clearly articulated a sound theory for the future merger between Kering and parent group, Richemont. However, as Solca shrewdly questions in his article for Business of Fashion: “Can anyone really see either Kering or Richemont trying to build what took LVMH – with the advantage of an open playing field – four decades?”
Even when indulging in his blue sky merger theory, it is fair to say the sheer scope and diversity of LVMH’s portfolio makes the luxury powerhouse unmatchable – at least for the near future.
However, with Gucci and Kering’s other white-hot labels on the rise, this all needs to be thoroughly digested as food for fashion and fiscal thought.
