Kering’s shifting sands: flat growth amid gucci’s turmoil and a bold new strategy
Kering reported a sobering first quarter, with flat revenue growth at €3.57 billion, a sign that the luxury conglomerate’s carefully constructed narrative is facing a significant challenge.
A dip in the deep end
Fashion and leather goods sales took a 3% hit, falling short of forecasts that predicted a more modest 2% decline. Gucci, the group’s powerhouse, fared even worse, slipping 8% – a drop significantly below expectations of -6%. While a slight improvement over last quarter’s 10% decline offers a glimmer of hope, the brand’s struggles are undeniable.
Gucci’s gamble and a slow burn
Luca de Meo, Kering’s CEO, insists a “comprehensive turnaround” is underway, anchored by decisive action across client engagement, distribution, and, crucially, the product offering. The brand has undergone a ‘reset,’ prioritizing category focus and rolling out new collections progressively throughout the year.
Primavera’s promise and marmont’s revival
However, not all is bleak. The arrival of Pierpaolo Piccioli’s designs, starting with La Famiglia, generated a positive response, accounting for over 7-8% of SKUs and sales. CFO Armelle Poulou highlighted the success of the reintroduction of the Marmont handbag, noting improvements in quality and design. Despite overall North American retail sales growth of 9%, Asia and Europe remained under pressure.
China’s strategic reset
The underperformance in China, Poulou acknowledged, demands a focused plan. Kering is investing in “sharper storytelling,” strengthening brand ambassadors, and tailoring activations to regional preferences, alongside upgrades to its store network. The company’s commitment to rebuilding cultural relevance is paramount to navigating this key market.
Regional disparities and emerging growth
Western Europe saw a 7% retail sales decline, North America a welcome 9%, while Japan experienced a 3% dip and Asia-Pacific a 4% drop. The Middle East, currently contributing around 5% of retail sales, saw a concerning 11% revenue decrease. Yet, Bottega Veneta, Saint Laurent, Balenciaga, and Brioni delivered growth, demonstrating pockets of resilience within the group. Bottega Veneta’s growth was particularly strong.
Beyond the numbers: a measured response
Luxury goods analyst Luca Solca observes that “it is easier and faster for the market to believe in a revival, than it is to produce it.” Kering’s Capital Markets Day is scheduled for April 16th in Florence, where de Meo will unveil his strategy – a mission to return all brands, excluding McQueen, to full-year growth. McQueen, currently undergoing restructuring, will be a key focus, albeit with a strategic re-evaluation.
A final note
Despite the challenges, Kering’s jewelry and eyewear divisions showed significant growth – 22% and 7% respectively. The company's commitment to a focused strategy and a renewed product offering will be intensely scrutinized, but one thing is clear: the luxury landscape is evolving, and Kering must adapt to thrive.