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About an hour outside of Paris, at a place called La Valet Village, you can get a really good deal on Gucci on TikTok. You can hear how excited people are about these discounts.
You love designer shopping, and you're in Paris anytime soon, you need to come to the designer outlets. So we're starting off with this beautiful green bag which was going for and fifty normally. Now at the outlet, one thousand, five hundred.
Wallet carrying bag Gucci luggis fifteen euros.
Crazy Angelina Rausquette covers luxury brands from Bloomberg's Paris bureau. She recently visited this outlet for a story about Gucci.
First of all, there were a lot of traffic, a lot of customers inside the outlets, and they were really trying to get rid of the previous collections. So I could see, for instance, yellow pumps with the Gucci the double G monogram, but also with the logo of Adidas superimposed on it. They were like seventy five percent off, you know, really flamboyant jackets.
These mega discounts point to two things. A Gucci is available to everyone, and b there's enough to go around. For a luxury brand like Gucci, that's a huge problem because if anyone can have Gucci, it's not much of a luxury, is it.
You can try to sell your stuff everywhere and have everybody wearing a Gucci cap or a Gucci T shirt. At the end of the day, that's not what you want. You want to make sure that people desire your brands, and at some point there's splurge on a two thousand euro three thousand euro five thousand year handbag.
But Gucci has done something different. It's tried to find the intersection of luxury and fashion. Jumping on the latest trends is fickle, and Angelina says the strategy has made Gucci vulnerable to the changing demands of consumers at a time when luxury shopping is already down across the board.
Why we know is that the whole market there's a slowdown, So obviously if you're in a weaker position like Gucci, it's going to be even trickier.
Figures released by Gucci's parent company, Caring on Tuesday showed an eighteen percent drop in Gucci's comparable revenue in the first quarter. Today, on the show Gucci's Popularity Problem, how caring strategy has put the brand in a tough spot, and what's at stake for the future of the fashion house. This is the big take from Bloomberg. I'm Janet Paskin.
While Gucci has been through many phases as a brand, it hit a bright spot in the nineteen nineties when it brought on an American named Tom Ford.
So saxy. There comes this Texas designer, and all of a sudden, he turned Gucci into something very desirable by basically putting out these collections that were empowering to women, to men, sexy. They were elegant, you know, siletos, cleavage.
Ford's sexy power style immediately made waves, and he and Gucci's CEO at the time, Domenico de Sole, were praised for breathing new life into the one hundred year old brand.
They pretty much transformed it, turning Gucci from a state and underperforming Italian brand known for its horse bed loafers into a fashion forward label whose products Hollywood embraced with gusto. For instance, Madonna famously wore a torquoise stilplouse at an Award ceremony in nineteen ninety five, and Gwyneth Paltrow also became a fan. She wore a red velvet suit, for instance. And Tom and Dom, as the pair were known, then brought back who from the break with sales.
Sorry, Gucci was suddenly a hot commodity.
So saxy see.
So hot in fact, that the brand became the center of a power struggle between two very rich, very ambitious men.
Bernard Arnaut, who was the luxury king at the time and his company LVMH owned Louis Wouiton and Moiet Tennessee Champagne, and Arnault has set his sights on Gucci and he wanted to take it over and have it for himself.
That's Bloomberg. Sarah Forden. She wrote House of Gucci, you know, the book that became the movie, the one with Lady Gaga and Adam Driver, and Sarah says Arnault was not the only interested party. Francoispinaut, the founder of the company that's now called Caring, also wanted Gucci, and after a pitched public battle for control of the brand, Francois Pinaut came out on top.
They ended up signing an agreement with franc Finot, who was the white knight who came in and sort of slipped Gucci out from under the grasp of Bernard Arnaut.
With a new parent company and Tom Ford holding the reins, Gucci continued to soar, but in two thousand and four it lost the star team of Tom and Tom. They quit in a power struggle with the Pinot family. In two thousand and five, a new CEO took over at Gucci's parent company, now known as Caring, Francois Ari Pinot, the son of the company's founder. People call him FHP. Under FHP, Gucci named a new creative director, Frida Giannini.
She was at the brand for more than ten years, but critics never really loved her designs and neither did consumers.
And that's when he brought in Alessandro Michaele, who ended up being a huge phenomenon for Gucci. And literally Alissandro had something like five days to design his first men's collection, and he pulled it off and it was a hit, and it sort of people had a visceral reaction to it.
Mcklly didn't bring back Tom Ford's sexy power aesthetic instead of the low cut body suits and leather. Mikelly's designs had bold, floral patterns neon colors. The ad campaigns featured flowers and feathers and flamingos in the center of the frame.
The adjectives that have been used to describe his aesthetics is like bohemian, chek, flamboyant, maximalist.
One of his most iconic creations furry slippers.
They're called the Princeton slippers. So their leather and you know it's an open ankle, and so you were them as the slippers, but they were furry, and that became really popular.
Mcklay also leaned into collaborations with mass market sportswear brands like Adidas and North Face, and suddenly everyone was buying Gucci products.
That was the designer that really managed to move the space of four years, you almost triple the size of the brand. This is unprecedented.
At this point, Gucci could have taken a page from some of its rivals like Chanelle and Ermez, limiting the amount of Mickel's pieces it made. It could have created waiting lists manufactured scarcity, but instead, outlets which sold Gucci goods at a discount remain part of the company's strategy. Angelina said that hurt the brand.
A big problem at Gucci on the business level was the presence of these outlets. Outlets. It accomplishes a function. You know, at some point it's the end of the season, there's some unsold inventory, and then you're going to be basically selling them at a discount in outlets. However, all the most desirable brands, if you think about re Rmez, they don't sell via outlets. It's against their principles because they reckon it devalues, it cheapens the brands in the eyes of the consumer.
This is Gucci's problem. It wants to appeal to the masses and be a high end luxury product at the same time a heritage brand whose clothes and bags and shoes become heirlooms, family treasures.
The issue with Gucci, as opposed to let's say, more classic, more heritage brands, it was always very as they call it, fashion driven, fashion forward, meaning that they became very trendy, but then a fashion trend. The issue with a fashion trend is that it's a trend. You can surf that wave for a while, but eventually consumers will tire of it, because that's what a trend is, That's what a fad is.
But luxury doesn't work that way, and even FHP knows it.
All the big brands have the same challenge. How do you remain exclusive and on the same time continue.
To grow Here he is talking to Bloomberg back in twenty fourteen.
If the growth was based on selling more and more, well, please everyone. But this would be the greatest danger for the brand.
So can Gucci turn things around? That's after the break. Gucci's parent company, Caring, has lost about a third of its value in the last few years, while shares at competitors of EMH and Armas have more than doubled. Reversing Gucci's slide and restoring the value of the brand won't be easy. Angelina says it could hurt sales or profit margins or both.
They've been saying we're on a turnaround face. They've been saying, we're trying to reduce outlet distribution, We're trying to reduce wholesale distribution, or in a bid to elevate the brand. This pledge to elevate the brand basically means to cater to the customers with the highest purchasing power who are not going to be as let's say, vulnerable to the economic cycles. If you want to elevate the brand and create desirability, you have to take basically short term hits.
So that means potentially, you know, because if you sell into these outlets and to and via wholesale, you're going to have bigger sales volumes, but then the margin is going to be lower, right, so there's probably going to be and they said it, short term pain. So this year, for instance, they expect the profitability of Caring to be lower than last year in order to basically strengthen and boost the fundamentals of this brand on the business side and on the creative side.
Representatives for FHP and Caring declined to comment on Angelina's reporting. These aren't easy changes, even in the best of times, and these are not the best of times for luxury fashion. Overall, inflation has cast a chill on luxury consumers, and Caring, more than others, is seeing buyers pull back. Meanwhile, the company is waiting to see how the designs from the
newest Gucci creative director will sell. In twenty twenty three, Sabato Desarno took over and his new collections are slowly starting to show up in stores.
Basically, the reception and the appetite of consumers for the new collections is going to be critical. And I think we'll have the fuller picture by the end of this year because all of the new creation under the new creative design team led by Sabato di Saro, will be really fully distributed into the all of the Gucci stores. So that's why the market needs to be also perhaps a little bit of patience, and that's why Carrying and the executives they say at pretty much every single quarterly call.
How's it going so far? In its latest quarterly earning report released on Tuesday, Caring, Gucci's parent company, worn recurring operating income will drop between forty and forty five percent in the first six months of this year compared to the same period a year ago. It says sluggish sales in China are part of the reason. Talking to reporters on Tuesday, Caring's chief financial officer said that Gucci is suffering in China in part because consumers there want high
end items or more affordable products. Gucci is stuck in the middle. But the company noted that Gucci's new collections have so far been quote very well received. So is it too late for Gucci Angelina?
I mean, it's true that if you look at the market gap, it's shrank a lot. And obviously the biggest sort of the ones who are suffering the most are the pinos themselves. Right if you look at the fortunes, it's about thirty billion dollars right now. I would never dismiss them because they've shown that they can really manage to turn around.
Obviously this is a family owned company, but Angelina is FHP the wrong guy for the job.
Yes, I mean that's pretty much something that our story found when we're doing the report is that some investors they think, you know, he's been there for years, he's chairman and CEO. Why don't you maybe he should just be chairman and appoint somebody like Francesca Belatini. Francesca Balatini runs if San Laurent. She's known to be even luxury rivals we spoke to they say she's one of the best out there. Maybe she should be CEO of Caring and and he should probably step back and be and
be chairman. He's got the credentials to you know, on the on the professional you know, he's he's made some really good calls in the past. It's just that right now it's in a tricky situation and some investors are really getting impatient because what happened is that the last four years luxury rivals did this on the stock market. They saw their share price rarely like, you know, to extreme levels, and unfortunately, over the same period, Caring shares
have lost about a third of their value. So that's why if you're a luxury invistor, you'd like, I'm getting impatient now.
This is the big take from Bloomberg News. I'm Janet Paskin. This episode was produced by Jessica Beck, Young Young, Julia Press, and David Fox. It was edited by Caitlin Kenny and Vidya Root, with additional reporting by Tara Patel. It was mixed by Ben O'Brien and fact checked by David Fox. Special thanks to Alex Webb and Matt Goldman of Bloomberg Originals. Our senior producer is Naomi Shaven, Our senior editor is Elizabeth Ponzo. Nicole Beamster Bower is our executive producer, and
Sage Bauman is head of Podcasts. Thanks for listening, Please follow and review The Big Take wherever you listen to podcasts. It helps new listeners find the show. We'll be back tomorrow.