GUCCI is banking on new ultra-high-end “salons” offering merchandise priced at up to US$3 million to help narrow a widening gap with rival Louis Vuitton, as it waits for its new creative director to arrive.

Chasing after the ultra-rich, whose fortunes are largely immune to economic turbulence, Gucci will stock the new private boutiques with some of its highest-end clothing, furniture and jewellery.

“Nothing will cost less than US$40,000, and it will go up to as much as US$3 million for high jewellery,” Kering boss Francois-Henri Pinault said this week.

Gucci’s focus on its wealthiest clients is a key element of its growth strategy after the brand’s sales fell 14 per cent in the last three months of 2022, dragged down by Covid-19 curbs in China and reduced appetite for its clothes in the United States – particularly among lower-spending shoppers.

New Gucci creative director Sabato De Sarno is set to take the helm in the second quarter, and will present his first fashion show in September in Milan. But because his collections will not hit the stores before next year, Gucci is under pressure to make sure that it does not lose more momentum in sales and margins in the coming months.

“We are not just waiting for Sabato to arrive,” Pinault said, adding that the label would promote an exhibit of its archives on a world tour, with a first stop in Shanghai. It also will ramp up its presence on the catwalk – with a show in Milan this month and a cruise collection in Seoul in May.

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Some of the new private salons will be within Gucci’s existing stores, while others will be in new boutiques, including on Los Angeles’ Melrose Avenue, opening in April.

Pinault conceded that 2022 results for Gucci, which accounted for just over half of group sales and three quarters of its profit, fell short of his expectations. Kering was also hit by controversy over ads featuring children for its Balenciaga brand that dented year-end sales.

Between 2015 and 2019, Gucci’s profits increased by nearly four times as sales almost trebled, lifted by the popularity of the eccentric, gender-fluid designs of Alessandro Michele.

But the brand has lost favour with shoppers since, just as rivals such as LVMH’s Louis Vuitton and Hermes maintained strong sales growth despite inflation and economic uncertainty. Michele departed Gucci abruptly in November after falling out with managers, sources told Reuters at the time.

Luxury insiders say that the label – known for its iconic GG belts, crossbody bags and Horsebit Loafers – has struggled to regain ground since it pulled back on marketing investments during the pandemic. Meanwhile, Louis Vuitton and fellow LVMH brand Dior pushed ahead, gaining prized market share.

Louis Vuitton spent 890 million euros (S$1.3 billion) on marketing investments in 2021, as indicated by estimates from Bernstein, compared to 487 million euros by Gucci.

This Christmas, Dior took over Harrod’s department store in London, and hosted a fashion show in Egypt with the pyramids as a backdrop, while Louis Vuitton’s January catwalk presentation featured a performance from Latin-Grammy-award-winning pop-star Rosalia.

LVMH does not break down sales for its brands, but its fashion and leather goods division, which is also home to Fendi and Givenchy, grew sales by 10 per cent in the fourth quarter, though it too suffered from a surge in China’s Covid infections.

Louis Vuitton exceeded 20 billion euros in revenue for the first time, almost double that of Gucci in 2022, and the label has just scored a major coup by hiring rapper Pharrell Williams as its new menswear creative director. Gucci, meanwhile, went for the relatively unknown 39-year-old De Sarno, who was previously at Valentino.

Well-known outside the fashion world, Williams’ debut runway show is scheduled for June.

After falling 4 per cent on Kering’s results announcement on Wednesday (Feb 15), the group’s shares have since recovered to a level not seen in almost a year, as Pinault’s commitment to put Gucci back on track reassured investors.

“Investor sentiment is turning less negative, and rightly looking ahead to potential improvements at Gucci underpinned by new creative direction,” said RBC Capital Markets analyst Piral Dadhania. REUTERS