Gucci’s new chief executive officer, Patrizio di Marco, said he’s fighting the recession by cutting production, making fewer styles to reduce costs, and bulking up the luxury label’s mid-priced range.
Di Marco said he’s refreshing goods made with the 88-year- old brand’s interlocking-G logo, adding crocodile and leather trim to printed-fabric purses priced between ¤800 ($1,125) and ¤1,900. The new CEO, who took over PPR SA’s biggest luxury label in January after Mark Lee resigned, said a group of senior executives agreed to leave during the transition as Di Marco brought in staff from his former employer, Bottega Veneta.
Designer Frida Giannini “knows how to balance the fashion elements with Gucci’s heritage,” di Marco said at the company’s production headquarters near Florence. In this market, buyers “want products with substance and good prices. We don’t need 75 variations on the same handbag. Two or three are enough.”
Sales so far this year are higher than 12 months ago after Gucci opened stores, di Marco said between jokes with workers and bites of lunch in the factory cafeteria last week.
Di Marco, 46, wouldn’t comment on trends at stores open at least a year or make a full-year forecast, besides saying “traffic is down everywhere.” He also declined to specify how many more stores will open this year or whether new openings have been scaled back.
“If di Marco is upgrading the logo and emphasizing quality and craftsmanship, that’s the right thing to do,” said John Guy, an analyst with MF Global Securities in London. “The Gucci brand was in danger of becoming too commoditised,” especially when Giannini and Lee introduced canvas bags costing as little as ¤400, Guy said.
“I don’t have to tell Frida to do anything other than to be herself,” di Marco said of Giannini. “She’s made beautiful products from the beginning.”
Di Marco, wearing mirrored Ray-Ban sunglasses, a narrow tie, a rockabilly hairstyle and a pinstripe suit to the interview, said he won’t cut jobs at Gucci, which employs 7,000 people directly and about 12,000 including contractors.
Mark Lee made way for Di Marco at the end of last year, declining to renew his CEO contract after 12 years working at Gucci. The US-born executive, who oversaw a 46 per cent- increase in the brand’s sales between 2004 and 2007, hasn’t commented on the reasons for his departure.
Gucci and Bottega are among eight brands owned by PPR, which is controlled by France’s billionaire Pinault family. Other labels inside the Gucci Group unit include Boucheron and Yves Saint Laurent, while PPR’s non-luxury businesses include France’s Fnac electronics chain and Conforama furniture stores.
Under di Marco and head designer Tomas Maier, Bottega’s critical acclaim soared, as did sales, surging 69 per cent in 2006 and 49 per cent in 2007 before stalling last year. A typical product was the hand-woven $6,000 leather Cabat bag.
Those high prices turned into a burden for Bottega Veneta in the recession. PPR said last month that Bottega Veneta sales fell 2.3 per cent in the first quarter.
Meanwhile, Gucci’s revenue rose 11 per cent amid demand for Giannini’s Hysteria and Babouska handbags. Those are priced between $1,600 and $2,500, depending on the variety of leather.
“Patrizio is revamping and balancing the Gucci product at the mid-level, which is exactly what he needs to do,” said Armando Branchini, a luxury-goods consultant at Intercorporate in Milan. Branchini also said di Marco and Giannini should step up the pace of new designs every fashion season to keep shoppers interested in Gucci’s evolution.
As part of his focus on Gucci’s heritage trademarks, Di Marco instigated a lawsuit against Guess? Inc last month, accusing the US brand of knocking off the GG pattern and green-red-green stripe motif.
“Gucci is one of those brands that is larger-than-life,” said di Marco, who has also worked at Prada SpA and LVMH Moet Hennessy Louis Vuitton SA. “We have to play up what it already has. The logo is part of its DNA.”
Giannini’s recent use of Gucci heritage includes a revival of the Jackie bag, named for Jacqueline Onassis Kennedy, and purses with a diamond motif that dates back to the 1940s. She became women’s wear designer in 2005 after the departure of Tom Ford, whose designs revived Gucci in the 1990s, and was handed creative direction of the brand the following year.
Di Marco said he’s studying how to build new stores less expensively, speeding their turn to profitability. Gucci has opened six new stores on three continents since the end of last year for a total of 264, and previously said it will continue to open others this year, especially in Asia.
The company is scheduled to open a flagship shop in Shanghai next week, the 28th Gucci store in the country since entering China in 1997.
