A Gucci store, operated by Kering SA, in the Sanlitun area of Beijing, China, on Saturday, Oct. 12, 2024.
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French luxury goods firm Kering on Tuesday reported better-than-expected fourth-quarter sales that were nevertheless down year-on-year amid lagging demand for its main Gucci label.
The high-end fashion group, whose brands also include Bottega Veneta, Balenciaga and Alexander McQueen, posted a 12% decline in fourth-quarter revenues to 4.39 billion euros ($4.52 billion), just slightly ahead of the 4.29 billion euros forecast by LSEG analysts.
Sales at Gucci, which account for almost half of the group’s total revenues, plunged 24% annually over the three month period to 1.92 billion euros, on a comparable basis, extending losses for the group’s once darling luxury label.
Full-year sales also dipped 12% to 17.19 billion euros versus an anticipated 17.09 billion euros.
Operating income for the year totaled 2.55 billion euros, in line with the group’s revised forecast as of October but almost half of the 4.75 billion result achieved the year prior.
“In a difficult year, we accelerated the transformation of several of our Houses and moved determinedly to strengthen the health and desirability of our brands for the long term,” chairman and CEO François-Henri Pinault said in a statement.
“Our efforts must remain sustained and we are confident that we have driven Kering to a point of stabilization, from which we will gradually resume our growth trajectory.”
The French fashion house pointed to a slight improvement in Asia Pacific and North America sales across its Gucci, Yves Saint Laurent and Bottega Veneta brands, but did not provide details on specific markets.
A Gucci luxury boutique in Paris, France, on Tuesday, Oct. 22, 2024.
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Kering is the latest European luxury group to report earnings over recent weeks, as investors look for signs of a revival in a sector hampered by a downturn in consumer spending, particularly in the key Chinese market.
Last month, investors were underwhelmed by only slightly better-than-expected full-year results from luxury bellwether LVMH. The market had put faith in a sector-wide turnaround after stellar results from Cartier owner Richemont, but sustained weakness in LVMH’s fashion and leather goods and wines and spirits segments pointed to further divergence in the sector.
Kering, which is especially exposed to the Chinese consumer, has been battling a particularly acute downturn, as its star label Gucci has fallen out of vogue.
On Thursday, the fashion group announced the departure of Gucci design chief Sabato De Sarno, in the first major change since Gucci CEO Stefano Cantino joined last year to revive the brand. Minimalist designer De Sarno was in situ for less than two years, after replacing Alessandro Michele, whose maximalist designs defined the brand over previous years.
De Sarno’s replacement will be announced “in due time,” the company said in a statement.
Simone Ragazzi, senior equity analyst at Algebris Investments, on Monday said that Kering would be hoping to signal a reset for the brand with the new design appointment, but added that investors were likely to remain cautious as legacy issues remain.
“This is a hope the market is betting on for quite a long time. It is always a little bit of a question mark,” he told CNBC over a video call.
“The brand got used to the ups and downs in the past, because it is one of the most fashion-driven luxury groups,” he continued. “The hope is that the new designer can repump the brand.”
