Updated 2:47 ET Feb. 11
PARIS — Kering is ready to turn the page on its “annus horribilis.”
Speaking after the French luxury group posted better-than-expected fourth-quarter sales, chairman and chief executive officer François-Henri Pinault said management has steadied the ship after a year of repeated profit warnings that saw its share price slump by more than 40 percent.
“We are confident that we have reached an inflection point, and that after a year of stabilization in 2025 we will gradually resume a trajectory of steady and increasingly profitable growth,” he said on a webcast with analysts and reporters.
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But on paper, the situation does not look much improved.
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Gucci again disappointed with a 24 percent drop in organic revenues in the three months to Dec. 31, worse than the 23 percent decline forecast by analysts.
The brand, which accounted for 63 percent of Kering’s operating profit in 2024, is poised for an extended period of turmoil following the exit of creative director Sabato de Sarno last week after less than two years in the job. His successor has yet to be named, but Pinault believes the brand is poised for a rebound.
“Gucci will come back. I have absolutely no doubts about this,” he vowed.
Kering’s three largest houses all have new CEOs since early January: Stefano Cantino at Gucci, Cédric Charbit at Saint Laurent and Gianfranco Gianangeli at Balenciaga.
And Bottega Veneta, one of the rare bright spots with a 12 percent rise in comparable sales in the fourth quarter, will also undergo a revamp under new creative director Louise Trotter, who arrived in late January following the departure of Matthieu Blazy for Chanel.
With no prospect of tangible improvement in China, a key market for the group, Kering officials were cautious about the prospects for 2025, promising to cap spending, close stores and streamline operations in a bid to gradually return to profitability in the second half.
In 2024, net profit plummeted 62 percent to 1.13 billion euros, while recurring operating profit was down 46 percent to 2.55 billion euros. The operating profit margin fell to 14.9 percent from 24.3 percent the previous year.
Kering netted 1.2 billion euros from the divestment of real estate assets, including the sale of a majority stake in three buildings in Paris to private equity firm Ardian, and it expects to raise another 2 billion euros or more over the next two years through refinancing deals, said Jean-Marc Duplaix, deputy CEO in charge of operations and finance.
The group is taking a breather after splashy acquisitions on Via Montenapoleone in Milan and Fifth Avenue in New York City last year. “We are not planning further investments in real estate properties,” Duplaix said.
Gucci Speculation
But the outlook for revenue growth is murky.
Sales fell 12 percent at reported exchange rates to 4.39 billion euros in the fourth quarter, beating market expectations for a 15 percent drop and sending Kering’s shares up 1 percent on the Paris Stock Exchange on Tuesday.
With the exception of Japan, all regions saw a sequential improvement in sales trends, driven by slightly stronger foot traffic and higher average tickets. But despite glimmers of improvement in Europe and North America, revenues from Chinese nationals were down by almost 30 percent during the quarter and there is no immediate relief in sight.
“We see that there is still pressure on Chinese demand,” Duplaix said in a meeting with press at Kering headquarters in Paris.
“We see a gradual return to growth, with a first quarter that will remain under pressure, an improvement in the second quarter and a gradual buildup during the year, due to easier comparison bases, but also our initiatives and upcoming launches,” he added.
Most of Kering’s luxury brands saw organic sales weaken in the fourth quarter. Saint Laurent was down 8 percent, and the “other houses” group, which includes Balenciaga and Alexander McQueen, reported a 4 percent decline. The Kering eyewear and corporate division bucked the trend with a 10 percent increase.
By comparison, organic sales at LVMH Moët Hennessy Louis Vuitton’s key fashion and leather goods division fell 1 percent year-on-year in the fourth quarter, beating consensus estimates for a 3 percent decline. Meanwhile, Compagnie Financière Richemont reported a surprise 10 percent revenue uptick during the same period.
Kering’s prospects largely hinge on Gucci, amid speculation that Hedi Slimane, who left Celine in October last year, could be named as its next creative director. Other names in the mix include Dario Vitale, who left his role as Miu Miu ready-to-wear design director at the end of January, and Maria Grazia Chiuri, artistic director of women’s collections at Dior.
(According to market sources, Chiuri has also held discussions to join Roman fashion house Fendi, which like Dior is controlled by LVMH.)
“This was an ‘annus horribilis’ for Kering, that much is reflected in the share price,” Luca Solca, luxury analyst at Bernstein, said in a research note. “A move in the right direction — we expect — could possibly work as a catalyst for both business and stock market improvement. The most credible name reported by media — in our opinion — could be Hedi Slimane.”
Francesca Bellettini, Kering’s deputy CEO in charge of brand development, credited de Sarno with helping Gucci to reconnect with its heritage, elevate quality and launch several new handbags, providing a solid basis for the next chapter.
“If you go back to the past history of Gucci, the moments in which this brand has been shining is when there was a complete 50-50 split in between tradition and fashionability,” she said. “We have arrived at a point where the company has a much better foundation than before, and now we need to inject the fashionability, the desirability.”
Calculating Risk
The executive refuted suggestions that de Sarno’s appointment had been a miscalculation, and his departure — just two weeks before the brand’s coed fall fashion show in Milan on Feb. 25 — a sign of turmoil.
“It may seem abrupt from the outside, but there is a strategy and a plan from the inside. This is not a decision that was taken two days ago,” she insisted. “The announcement of the new artistic director will be done promptly, sooner rather than later.”
Whoever takes on the herculean task of turning around the brand will have to put up with more austerity measures.
Kering, which operated 1,813 stores at the close of last year, plans to close 50 units in 2025, a third of which will be outlets, Bellettini outlined.
Its wholesale revenues fell 500 million euros last year and it expects to lose another 350 million euros in 2025 from a combination of slowing orders and its ongoing strategy to focus on exclusive distribution and doors, she said.
“To offset the impact that cutting wholesale, closing stores, closing outlets will have on the revenues, we need to significantly improve our like-for-like sales in full-price stores and increase their sales density and also their productivity,” Bellettini cautioned.
There are further risk factors on the horizon.
While the French government’s plan to raise the corporation tax should have limited impact on Kering’s effective tax rate at group level, since most of its operations are based in Italy, Pinault cautioned the move could make France less attractive to foreign investors.
In addition, U.S. President Donald Trump’s threats of tariffs on a wide range of goods and commodities could have broad repercussions.
“We know that tariff decisions can have an impact on inflation levels in the United States, so we must remain cautious,” said Pinault, though he added that with the election out of the way, several economic indicators are improving. “There is a conjunction of events meaning the U.S. market should be significantly better this year than last.”
In a signal of confidence, jeweler Boucheron opened its first U.S. stores in New York City and Las Vegas last year, and another location on Rodeo Drive in Los Angeles is in the works, while Bottega Veneta recently inaugurated a boutique in Chicago.
Pinault said he expects another year of headwinds for the luxury sector, but he’s confident that Kering is now better equipped to meet them.
“I don’t control the economic environment so we’re focusing on the things we can control,” he said. “Today, we are ready to move forward.”