Why Gucci and Saint Laurent are thriving in America while retail struggles

Maybe there’s a reason Gucci is all about New York lately.
Maybe there’s a reason Gucci is all about New York lately.
Image: Reuters/Tony Gentile
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The US retail industry is going through an upheaval. Right now, store closures across the country are on pace to set a record in terms of how much square footage will shut down this year.

But circumstances aren’t dire for everyone. Kering, one of Europe’s leading luxury groups, is off to an astounding start in the US in 2018.

Across its tentpole fashion labels—Gucci, Saint Laurent, and Bottega Veneta, which together make up more than 80% of its sales from continuing operations—Kering saw sales in North America rise as much or more than in any other region in the first quarter (pdf). The US, of course, makes up the biggest share of the North American group.

On an April 24 call with investors, CFO Jean-Marc Duplaix offered some insight into why Kering’s brands are finding success in America. For one thing, he said, the environment in the US improved.

That might be news to companies that are shuttering stores at a rapid pace, but a close look at US retail shows the landscape splitting in two. The high end and low end are flourishing, while everything in the middle flags. Meanwhile, pressure on the industry in general has made retailers more selective about the brands they’ll feature, Duplaix said, with a premium put on labels that have something unique to offer consumers.

Indeed, Duplaix noted that after a few soft years, fashion-forward labels are seeing good traction with US consumers again. It happens that developing a strong, original point of view at each of its labels has been Kering’s strength lately, most clearly exemplified by the alluring oddities routinely on display at Gucci.

There were assorted other factors that boosted Kering’s brands. Gucci’s total online sales doubled compared to the previous quarter, driven by the US. Sales to tourists were also up, as it seemed some of China’s high-spending travelers were heading to America. And the brands all did things individually that helped as well.

But in fashion there’s no substitute for making desirable products. For brands that can do that, there are still plenty of dollars up for grabs in the US.