-14% after revenue warning

The giant of the luxury sector Kering collapses on the stock market. The value of the stock fell by 14.5%, causing a loss of over 7 billion in capitalization. This decline was triggered by yesterday’s advance announcement that first-quarter revenues would contract by 10%. The stock’s decline was mainly due to a 20% decline in sales of its flagship brand, Gucci, which was particularly affected by poor performance in the Asia Pacific region.

Kering turnover for the January-March period expected to be -10%

In a short note published yesterday, Kering predicts a sales drop of around 10% in the first quarter of 2024. This decline is mainly attributed to the challenges its flagship brand is facing, Gucciwhich is expected to suffer a 20% decrease of sales mainly due to the difficulties encountered in the Asia-Pacific area. The data relating to the January-March period are expected according to the financial calendar of the group led by François-Henri Pinault for April 23rd.

In 2023, Kering reported a general decline in sales of its brands, with the exception of eyewear. Full-year turnover fell by 4% (2% on a comparable basis) to 19.6 billion euros. In the fourth quarter alone, revenues decreased by 6% in absolute terms and 4% on a comparable basis, reaching 4.97 billion euros. Direct sales, including e-commerce, remained stable, while indirect sales (wholesale), which represent 22% of total sales, decreased by 11%. Recurring operating profit fell 15% to €4.7 billion, with revenue margin down to 24.3% compared to 27.5% in 2022. Group recurring net profit fell 18% to 3.061 billion euros.

Gucci’s difficulties

According to analysts at Citigroup, one of the main US investment banks, Kering is likely to have to reduce its consensus estimates downwards. Additionally, the recovery of its parent brand, Gucci, may take longer than expected.

Gucci hasn’t been enjoying a thriving moment for some time. Indeed, the Italian fashion house remains the “main patient” within the group, but also the most prominent brand, together with Saint-Laurent, Bottega Veneta, Brioni and Pomellato. During 2023, Kering had also made changes to Gucci’s management, entrusting leadership to one of François-Henri Pinault’s most trusted collaborators, Jean-François Palus, deputy CEO of Kering. Pinault reiterated in February that “our priority is to get Gucci back on the right path”, underlining however that “this will take time and will not happen overnight”.

The entire sector is declining

Kering’s warning represents an extremely disturbing signal for the entire luxury sector. Profitability prospects had already been revised downward following Kering’s announcement of EBIT cuts for this year, mainly due to planned investments to revive Gucci and other brands, analysts said. Citigroup even expects a 15% reduction in consensus EBIT and EPS for 2024 due to Gucci alone.

However, the decline does not only concern Kering, but involves the entire luxury panorama. LVMHa multinational that owns prestigious brands such as Bulgari, Fendi and Louis Vuitton, has suffered a 3.1% loss. Other companies in the sector, such as Richemont, Dior and companies listed on the Piazza Affari such as Moncler and Cucinelli, also recorded a significant decline, with loss percentages exceeding 1%.

Former minister Giovanna Melandri on the Kering board of directors

In recent days there has been a lot of talk about Kering in Italy due to the appointment of the former Minister of Culture and then of Sport to the board of directors Giovanna Melandri. Melandri will be one of the three new independent directors of the group. In addition to the former parliamentarian, Minister of Culture from 1998 to 2001 and then of Sport and Youth from 2006 to 2008, Kering has proposed the well-known managers Rachel Duan and Dominique D’Hinnin, as well as foreseeing the exit of the actress at the end of her mandate Emma Watson.

From April 25, the Kering Board of Directors will have 13 members: 64% will be independent and 55% will be women. Six countries are represented: USA, GB, China, France, Italy and Turkey.