October 4, 2018 / 6:12 PM / 2 months ago

Gucci boss reassures staff over looming era of slower growth

PARIS (Reuters) - The head of Gucci has reassured shop staff over a looming slowdown in the pace of sales growth after a revenue explosion at the Kering (PRTP.PA)-owned label, according to an internal video message seen by Reuters.

FILE PHOTO: Gucci CEO Marco Bizzarri poses at the Los Angeles County Museum of Art (LACMA) Art+Film Gala in Los Angeles, October 29, 2016. REUTERS/Danny Moloshok/File Photo

Italy-based Gucci - the biggest earnings driver at the French luxury conglomerate - has outperformed most of its peers since 2016 thanks to a flamboyant makeover under designer Alessandro Michele.

The boom has lasted longer than many fashion analysts expected, even as rivals invest in competing brands.

Marco Bizzarri, Gucci’s chief executive since 2015, said in a message to store employees they should not be daunted by any sign of a slowdown or variations in daily performances, which he said would be normal after rapid growth and at a time when year-ago comparisons are growing tougher.

“I am here today to reassure you in the sense that Gucci is stronger than ever,” Bizzarri said in the video message, adding Gucci was maintaining its competitive advantage over “any other brand in the arena.”

Kering executives had already flagged to market watchers a “progressive normalization” of sales growth in 2018.

The nearly four-minute-long video was presented to staff in the past week following Gucci’s catwalk show in Paris, which was highlighted by Bizzarri in his comments.

A copy of the video was shared with Reuters by a person who had received it in the fashion industry.

Kering declined to comment.

“ENJOY THE RIDE”

Gucci, like its rivals, has been carried by strong demand from Chinese consumers. Comparable sales at the label increased 40.1 percent in the second quarter from a year earlier.

That was a touch below forecasts following better-than-expected 48.7 percent growth in the previous three months, but still a faster pace than rivals like LVMH’s (LVMH.PA) Louis Vuitton, a brand Gucci wants to overtake one day as it aims to increase annual sales to 10 billion euros, from 6.2 billion euros ($7.15 billion) in 2017.

“We need to recognize the fact that at a certain point we’re going to slow down, we cannot keep on growing 50, 60 percent per month, it’s impossible,” Bizzarri said in the video, adding that growth was still “exceptional” and telling staff to “enjoy the ride”.

“I’m happier now than I was two years ago, I’m very very confident,” Bizzarri said.

Kering’s shares have risen more than 20 percent this year, driven in large part by Gucci’s strong performance. Its Saint Laurent and Balenciaga brands are riding high too, though Gucci accounts for over 70 percent of group profits.

Gucci is investing in e-commerce and store facelifts to keep growing the brand, as well as building up areas like cosmetics and perfumes to maximize revenue from non-core products.

Quirky runway styles have helped it attract younger shoppers at a time when not all luxury firms have profited from a benign industry backdrop. Yet Gucci’s distinctive look could make it vulnerable to brand fatigue, analysts have said.

Broader market worries about a potential slowdown in China rattled luxury stocks from LVMH to Kering and Burberry (BRBY.L) on Thursday.

Reporting by Sarah White and Pascale Denis; Editing by Alexandra Hudson

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