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MarketScreener Homepage  >  Equities  >  Euronext Paris  >  Hermès International    RMS   FR0000052292

HERMÈS INTERNATIONAL

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Something old, something new: Gucci revives classics to regain edge

11/19/2020 | 08:03am EST
Gucci mixes old and new as brand seeks to regain edge

MILAN (Reuters) - Gucci is revisiting 1960s handbags and other classics in its latest collection, mixing them with up-to-the-minute sneakers and logoed skateboards, as it seeks to reach a wider audience and reverse a fall in sales after years of stellar growth.

With traditional fashion shows cancelled because of the coronavirus pandemic, designer Alessandro Michele teamed up with U.S. director Gus Van Sant to shoot a seven-part miniseries to show off his largely seasonless, gender-neutral creations.

Gucci is showing the videos as a virtual fashion film festival, with a new instalment released daily over the course of this week.

The films, which have a dream-like, retro quality with vintage cars and juke-boxes, follow a woman, played by Italian actress Silvia Calderoni, as she goes about her daily routine in Rome.

They feature cameo appearances by celebrities close to the fashion house such as singers Billie Eilish and Harry Styles - all wearing Gucci creations, including re-editions of Michele's designs from his first 2015 collection.

The former One Direction singer has also created a buzz in the fashion world by appearing on the cover of a December edition of Vogue, clad in a Gucci ball gown.

GUCCI WATERSHED

Behind the scenes, luxury industry watchers say this is a watershed moment for Gucci, the business that drives the bulk of revenue and profits at parent Kering, but which has been losing steam over the past year.

After a nearly fourfold increase in earnings since Michele took the creative helm, Gucci's revenues have slowed down, lagging rivals like LVMH's Louis Vuitton and Hermes. Gucci was the only fashion brand in Kering's stable to suffer a sales decline in the third quarter.

Much of the brand's success up until recently relied on well-heeled, young Chinese shoppers travelling to Europe's fashion capitals and snapping up Michele's quirky, flamboyant designs.

But with international tourism almost frozen due to the pandemic, Gucci can no longer rely on foreign visitors coming to Europe's shopping streets to boost sales.

Consultancy Bain, which produces closely-followed forecasts for the luxury industry, said on Wednesday the share of high-end goods purchases by local clients is expected to rise to 80-85% of the total this year from 60% in 2019. Local buyers are still set to account for 65-70% of luxury shopping in 2025.

Gucci is rejigging its marketing and product line-up to refocus the label and boost its appeal among local and older shoppers in Europe and the United States. The fashion house has, for example, produced "re-edited" versions of its classic handbags such as the 1,800-euro Jackie 1961.

People born from 1981 onwards -- Millennials and Generation Z buyers -- now make up almost 60% of luxury purchases, Bain said, but brands cannot afford to neglect the remaining 40%.

That is why on top of tweaking their ranges to include less trend-driven items, most luxury labels are directing their customer service to establish close contact with clients who are not able to go to the stores themselves.

Gucci is still doing well on many fronts, including an operating margin of 30% in the first half of 2020, down from a record high of 40.6% a year earlier but still far exceeding that of many competitors.

But analysts say there are some signs of fatigue.

Luca Solca of Bernstein said Gucci's social media traction, while still high, is diminishing. It also seems to have more trouble selling excess inventory at full price.

"There is no red flag at Gucci, but we see an opportunity to act now in order to avoid bigger issues down the road," said Solca in a note.

(Reporting by Silvia Aloisi. Editing by Jane Merriman)

By Silvia Aloisi


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
CHRISTIAN DIOR SE -2.20% 436 Real-time Quote.-4.09%
HERMÈS INTERNATIONAL -1.78% 881 Real-time Quote.0.16%
KERING SA -1.37% 561.8 Real-time Quote.-5.48%
LVMH MOËT HENNESSY - LOUIS VUITTON SE -2.77% 493.95 Real-time Quote.-3.32%
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Financials
Sales 2020 6 232 M 7 525 M 7 525 M
Net income 2020 1 136 M 1 372 M 1 372 M
Net cash 2020 4 550 M 5 494 M 5 494 M
P/E ratio 2020 81,8x
Yield 2020 0,51%
Capitalization 92 153 M 111 B 111 B
EV / Sales 2020 14,1x
EV / Sales 2021 11,8x
Nbr of Employees 15 698
Free-Float 31,7%
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Mean consensus HOLD
Number of Analysts 18
Average target price 759,52 €
Last Close Price 881,00 €
Spread / Highest target 6,97%
Spread / Average Target -13,8%
Spread / Lowest Target -53,5%
EPS Revisions
Managers and Directors
NameTitle
Axel Dumas Co-Executive Chairman-Management Board
Henri-Louis Bauer Co-Executive Chairman-Management Board
Éric de Seynes Chairman-Supervisory Board
Éric Marie Joseph du Halgouët Executive Vice President-Finance
Charles-Éric Bauer Member-Supervisory Board
Sector and Competitors
1st jan.Capitalization (M$)
HERMÈS INTERNATIONAL0.16%111 417
LVMH MOËT HENNESSY - LOUIS VUITTON SE-3.32%300 609
ESSILORLUXOTTICA-2.74%65 545
COMPAGNIE FINANCIÈRE RICHEMONT SA2.77%52 265
LULULEMON ATHLETICA INC.-1.01%44 901
VF CORPORATION-0.02%32 725