Gucci gives itself a makeover after record drop in profits

A model walks the runway at the Gucci Show during Milan Fashion Week (Getty)

Italian fashion house Gucci, famous for its leather goods with intertwining G buckles, is branching into cosmetics following disastrous financial results last year.

The line’s face is Charlotte Casiraghi, Princess Caroline of Monaco’s daughter, continuing a Monégasque fixation in which the tiny principality has been the setting of a Nicole Kidman film and a Louis Vuitton fashion show within the past fortnight.

But it’s not the tax-free bank accounts of the Monaco super-rich that Gucci is targeting by launching cosmetics – rather, everywoman. To borrow the fashion industry’s current favourite turn of phrase, cosmetics represent luxury at its most accessible.

They always have: the beauty industry seems recession-proof, an indulgence that’s cheap compared to a designer dress or handbag, but still loaded with logoed cachet.

Gucci Beauty looks set to make a handsome profit. The mark-up on cosmetics and perfume is around 80 per cent, and the lucrative revenue stream supports many designer brands. Chanel is rumoured to net $1billion (almost £600m) from cosmetics and perfume alone.

The Gucci brand could do with that. In February, the label’s parent company, Kering, announced a drop of 95 per cent in net profits for 2013: profit sat at €50m (£41m), down from €1.05 billion in 2012. The label reported its slowest quarterly sales growth in four years for the final three months of 2013, like-for-like sales up just 0.2 per cent. The implication being that they may grind to a halt altogether, or even reverse.

By the end of last year, Gucci had cut its offerings of low-price leather goods by 25 to 30 per cent, and reported proudly that sales of logo-free products were up from 44 per cent in 2012, to 62 per cent. The implication? That Gucci aren’t interested in selling handbags to the masses.

What they are interested in selling them are cosmetics. Gucci’s new lines will include Gucci Eye, Gucci Face, Gucci Lip, Gucci Nail together with brushes and skin products. With that 95 per cent profit drop recorded, the only question is why they didn’t do it sooner.

Kering representatives contacted The Independent to clarify that this one-off, exceptional drop in profits was directly linked to the 2013 disposal of Kering's retail assets (Fnac and La Redoute) and to the situation of Puma, without any relation to the luxury division. Revenue of Kering's Luxury division was +7.2% in 2013 and recurring operating income for this same division was up 4.4%. As for Gucci specifically, profits increased in 2013. All details are available in Kering's financial documents.