Balenciaga skyrocketing towards €1 billion revenue mark
After Gucci, Bottega Veneta and Saint Laurent, "the next [Kering group] brand to top the €1 billion revenue mark will be Balenciaga," said Kering CEO François-Henri Pinault, at the presentation of the group's annual results. Pinault was extremely optimistic about the potential for Balenciaga, which was acquired by the French luxury group in 2001.
The 100-year-old business had lost much of its appeal over recent years, but found renewed zest under the aegis of Demna Gvasalia, founder of the Vetements label, who took over as Creative Director in 2015. Gvasalia succeeded in modernising Balenciaga, adding a cool factor it clearly lacked.
At the time, Balenciaga's revenue was estimated to be in the region of €400 million. Since 2015, the label grew at a much faster clip. According to François-Henri Pinault, "it's the brand which grew fastest in the fourth quarter, with sales leaping 60%, and which posted the strongest increase within the group in the second half of the year, exceeding that of Gucci."
"The brand's heightened appeal has translated into record revenue growth, chiefly in the ready-to-wear and footwear categories. Taking the sales increase into account, Balenciaga's profitability is rising very strongly," stated Kering in its annual report.
"[Revenue] grew 40% in 2017, operating margin reached double figures, and January 2018 is consistent with the latest quarter. But all of this is recent and needs to be consolidated. We must let them work. As it did for Gucci, growth must extend to all product categories and all geographical areas. Nevertheless, Balenciaga is travelling in a very positive direction," said Pinault.
"At this pace, medium-term growth could be much higher than forecast, even if the €1 billion revenue mark won't be reached this year," he added.
In 2017, Balenciaga enjoyed phenomenal success with some of its accessories, like the Triple S and the futuristic Trainer Speed sneaker models, the latter one of the label's best-sellers. Not to mention Demna Gvasalia's new take on Crocs clogs, with sky-high platform soles, which were out-of-stock right after hitting the market in early February 2017, and are likely to make more headlines in 2018.
It's proof of the talent of the label's creative director, who managed to win a passionate following among the younger generations in a handful of seasons, making Balenciaga's popularity boom and boosting its sales, 60% of which are generated by the label's 121 monobrand stores.
"The label is buoyant. With Demna Gvasalia, its vision is in step with the times and with the brand's design ethos. As for us, we are putting at Balenciaga's disposal the resources to transform this vision into results. Its potential is enormous, notably in leather goods and accessories," concluded Pinault.
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