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Sales at French luxury group Kering have been weighed down by weak performance at its biggest brand Gucci, as investors wait for a new designer to be named to lead a stalled turnaround.
Kering’s sales fell 12 per cent on an organic basis in the fourth quarter to €4.4bn. At Gucci, which accounts for about half of group sales and two-thirds of profits, sales were down 24 per cent to €1.9bn, below analysts’ expectations compiled by Bloomberg.
The update comes after Kering said last week it would part ways with Gucci creative director Sabato De Sarno after only two years, days before reporting full-year results to the market.
On Tuesday the company revealed that Gucci’s operating income for the full year had fallen 51 per cent to €1.6bn, though it flagged a “slight sequential improvement” in North America and Asia-Pacific between the third and fourth quarters.
François-Henri Pinault, chair and chief executive of the Paris-listed group, said: “We are confident that we have driven Kering to a point of stabilisation, from which we will gradually resume our growth trajectory.”
On top of woes at Gucci, a broader luxury slowdown has also weighed on Kering, which reported a 46 per cent drop in group operating income in 2024, to €2.55bn, narrowly ahead of Kering’s own guidance.
The group’s net debt has also surged to €10.5bn in 2024, from €2.3bn two years ago, following several expensive acquisitions, including perfumer Creed and a €1.3bn building on Milan’s Monte Napoleone shopping street.
“This was an ‘annus horribilis’ for Kering,” said Luca Solca, analyst at Bernstein. “Operating profit developments are better than expected for virtually all brands. Yet, the absolute decline relative to 2023 is striking.”
Kering’s shares have underperformed peers such as LVMH, Hermès and Richemont since 2021 as Gucci struggled. Its stock rose 4.7 per cent on Tuesday morning but was down about 40 per cent in the past year, leaving it with a market value of roughly €30bn.
The group issued several profit warnings in 2024, a rare occurrence in an industry with high margins and an affluent client base.
Rivals have performed better despite the challenging context. Cartier owner Richemont surprised the market by growing 10 per cent organically in the quarter, far ahead of expectations as Americans spent heavily on high-end jewellery.
Larger peer LVMH outpaced consensus but disappointed investors by growing only 1 per cent in the fourth quarter.
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While a tough market, particularly in China, is partially to blame, the loss of brand identity and vulnerability to trend cycles have taken a heavy toll on Kering’s biggest brand. Sales also fell at Saint Laurent, the group’s second-biggest brand, down 8 per cent on an organic basis in the fourth quarter, while sales at Bottega Veneta accelerated.
“I don’t believe there was going to be any turnaround [at Gucci] under the previous designer. The product wasn’t working,” said Flavio Cereda, fund manager at GAM.
“If they get the right name [for a new designer] and say the right things, there will be goodwill . . . but the operational performance will take a long time. If it’s exceptional it will take three seasons, but more likely it will take four to five at least to start showing in the numbers.”
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