The luxury giant Kering continues to drink the cup. The group, led by François-Henri Pinault, warned this Tuesday that “ given the deterioration in turnover trends, the group now anticipates a decline in its current operating income for the first half of 2024 of around 40% to 45% compared to the first half of 2023 “.
A comment made during the presentation of its quarterly results. This would then be much worse than the decline observedlast year, wherehe luxury group reported a drop of 15% in operating profit, and 4% in its turnover. Moreover, for the first three months of the year, Kering has already recorded a turnover of 4.504 billion euros, down 10% on a comparable basis compared to revenues for the first quarter of 2023. A figure which contrasts strongly with that of its competitor LVMH, which posted an increase of its income by 3%.
Above all, Kering is doing worse than the consensus of analysts who were counting on a drop of 9% according to UBS. “ The performance of Kering deteriorated sharply in the first quarter », recognized François-Henri Pinault. Note: between January 2023 and January 2024, the group’s stock market share lost 28%. For comparison, over the same period its competitor LVMH had only lost 2%.
And this Wednesday morning,‘action Kering fell 8.47% to 320.55 euros around 9:08 a.m. (Paris time), its lowest level in six years, in a market down slightly by 0.06%. Since the start of the year, Kerin’s shares have fallen by almost 20%.
Gucci and China singled out
This poor performance shows the group’s difficulties in key markets, particularly China. There, the luxury sector hoped for a rapid recovery after the lifting of health restrictions, but these expectations were dampened by the real estate crisis in the country and the high unemployment rate among young people. But Kering’s warning above all illustrates the sharp loss of momentum of its Gucci brand.
“ We anticipated a difficult start to the year; market conditions, particularly in China, and the strategic repositioning of some of our houses, starting with Gucci, increased the pressure on our turnover. “, commented the CEO of Gucci. Sales of the flagship house, which represents almost half of the group’s sales and two-thirds of its operating profit, decreased by 18%, to 2.079 billion euros. This, while the consensus expected 14% for Gucci.
“ Given this decline and our determination to continue to selectively invest in the desirability and exclusivity of our brands over the long term, we anticipate a significant decline in current operating income in the first half. We work tirelessly to overcome current challenges and recreate the conditions necessary for long-term sustainable growth », added the CEO of the group.
Big cleaning at Gucci
Faced with Gucci’s difficulties, its parent company decided to launch a makeover plan. After parting ways with Gucci’s artistic creator, Alessandro Michele, in January 2023, succeeded by Sabato de Sarno, François-Henri Pinault appointed one of his closest collaborators as head of the Italian brand, Jean-François Palus, Deputy CEO of Kering.
The group also indicated, during the presentation of its annual results last February, that it wanted to implement “a strategy of elevation” (upmarket). “It involves continuing to invest in our brands in the long term”and not to seek a return to growth next year, explained Kering financial director Armelle Poulou, during a telephone exchange with press agencies.
“ This type of strategy is virtuous for brands in the medium to long term but generally requires a lot of time and investment before bearing fruit. », Commented for La Tribune Charles-Louis Scotti, analyst at Kepler Cheuvreux, responsible for research in the luxury sector, in February.
In such a context, “ our continued investment in our homes will weigh on our results in the short term », François-Henri Pinault had already warned in February. A heavy note which should therefore especially weigh on the first half of the year.
(With agencies)