Billionaire Pinaults struggle to keep Gucci off the clearance shelf

Customers at a Gucci boutique sifted through discounted, out-of-season items, a move that would be unimaginable for luxury goods competitors like Chanel, Hermès, and Louis Vuitton.

A recent Friday afternoon saw customers at a Gucci boutique sifting through mounds of deeply discounted, out-of-season items, including bright green clutches, furry slippers, yellow heels, and flashy jackets. For competitors that specialize in luxury goods such as Chanel, Hermès, and Louis Vuitton, such a sale in a store in an unremarkable Parisian suburb close to Disneyland would be unimaginable.

However, Gucci's parent company, Kering SA, is unable to stop a precipitous drop in sales due to a confused understanding of its role in high fashion and an ineffective management approach, leaving other companies in the €362 billion ($385 billion) global personal luxury goods market more resilient as the market cools. Bernard Arnault, founder of Gucci, is now the world's richest person and the family behind it is the wealthiest in Europe due to a doubling of shares at rivals LVMH Moët Hennessy Louis Vuitton SE and Hermès International SCA since March 2020.

Kering, however, has lost over a third of its worth, a significant issue since the Pinaults began living in luxury at the turn of the century. Kering receives over two-thirds of its profit from Gucci. About ten long-term investors, former insiders, and industry watchers say the business needs a far more dramatic makeover than it has planned as Kering embarks on a crucial attempt to turn things around.