For the third-quarter in the realm of luxury fashion, power dynamics are shifting as global demand for luxury goods is both waning and changing.
The ultra-wealthy are the target market for the luxury business while the middle class reduces their expenditure.
Kering, the company that owns Gucci, reported a 14% drop in sales for the third quarter, with its flagship brand Gucci suffering a similar loss. However, companies like Brunello Cucinelli and Hermes are doing well.
Differences in clientele are blamed for this, with the wealthy continuing to spend while the affluent are losing faith in their ability to spend.
Despite immediate difficulties, Kering, especially Gucci, has shifted its focus towards top-tier purchasers. Previously, the company catered to younger, fashion-forward consumers who are now impacted by inflation. Brands are changing their tactics and product offerings to appeal to more high-net-worth individuals (HNWI) as quiet luxury becomes more commonplace.
Investors are not buying into Kering’s continued makeover of Gucci. In order to close the valuation difference with rivals such as LVMH, Kering needs to pursue a more conventional luxury image.
