By LIZ MIRANDA | NEW YORK, U.S. A new luxury handbag deal is expected to bring a boost to a major global fashion brand that is already struggling with an image problem.
Gucci announced Thursday it will invest $200 billion to build a $1 billion luxury handbags factory in Mexico.
The investment will help Gucci achieve a $250 billion global luxury market, including in China, Japan and the U.K., according to a statement from the company.
The deal includes $150 million in cash, and the Mexican government will take a 40% stake in the project.
The Mexican government has said it will take over management of the Mexican company after it has completed the project, which would require a $500 million loan from the Mexican central bank.
Guinness & Mather, a global fashion group, said it plans to invest in the plant.
The announcement comes after the Gucci group posted a disappointing third-quarter profit that fell below analysts’ expectations, prompting questions about its future.
It reported a net loss of $16.2 million on revenue of $86.5 billion.
Guys are starting to get worried, because Gucci is the one that is actually building the product.
Guillame Garbo, president of the International Council of Fashion Designers and Innovators, told Bloomberg TV that the deal is good news for Gucci, which has struggled to gain a foothold in the high-end luxury market.
“This investment is a great example of how we are starting a process of transformation in the face of our current challenges,” Garbo said.
Guccis luxury hand bags have been on the decline since Gucci discontinued them in 2014.
A study by the International Federation of the Fashion Industry (IFFI) last year found that handbags were falling in demand among millennials, who make up about 30% of the global luxury fashion market.