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Kering’s sales fell 16 per cent on a comparable basis to €3.79 billion in the third quarter of 2024, the company said on Wednesday, falling below analyst expectations of a 12 per cent decline. Revenue at Gucci — its largest brand — slumped 25 per cent to €1.64 billion.
“This sales update marks Kering’s third profit warning in a row — the company now sees operating income in 2024 at approximately €2.5 billion, down 11 per cent below the current Bloomberg consensus, and implying a second half 2024 operating income of €1 billion, down 50 per cent below the second half of 2023,” wrote Bernstein analyst Luca Solca in a note.
Kering said the Gucci turnaround was being hampered by the wider luxury headwinds. “With discipline and determination, we are executing a far-reaching transformation of the group, and at Gucci in particular, at a time when the whole luxury sector faces unfavourable market conditions,” said Kering chairman and chief executive François-Henri Pinault in a statement. “This severely impacts our performances in the short term.”
Sales at Saint Laurent fell 12 per cent, while the ‘Other Houses’ division, including Balenciaga and Alexander McQueen, fell 14 per cent. Bottega Veneta was the “bright spot”, according to chief financial officer Armelle Poulou, with sales increasing 5 per cent. The eyewear and “corporate” division, which includes Kering Beauté, was also up 7 per cent.
The effects of the luxury downturn have been felt by many across the industry. LVMH’s fashion and leather goods division reported a sales decrease of 5 per cent in Q3 (which missed expectations); Ferragamo reported sales down 7.2 per cent; while Ermenegildo Zegna Group said sales were down 7.8 per cent. Hermès is to report its earnings this Thursday, Moncler and Prada Group next week, and Richemont on 8 November.
By region, Kering retail sales in North America fell 15 per cent in the third quarter, Western Europe was down 11 per cent and Asia Pacific declined 30 per cent excluding Japan, which was up 3 per cent, and the rest of the world up 2 per cent. Kering noted that its growth in Japan had significantly slowed, mirroring LVMH’s experience during the quarter.
Gucci just appointed a new chief executive, Stefano Cantino. “The team is quite complete now at Gucci at the top level with all the different changes that you have seen recently. There will be further change in the organisation especially in the communications organisation. We will be happy to welcome some new senior executives to lead the communication,” Poulou told analysts on Wednesday night, noting that the new organisation will be operational by the end of 2024.
The house is pursuing the overhaul of its leather goods category with “the introduction of a host of new products late in the quarter [that is] well underway”, according to the earnings release. Gucci is also “working on making its communication even more efficient”, according to Poulou. She cited the new campaign that promotes both the Blondie handbag (which sits at the higher end of the pricing scale), as well as Gucci’s heritage.
“This set of results makes the questions on Gucci’s current strategy and direction all the more relevant,” said Solca.
“Our absolute priority is to build the conditions for a return to sound, sustainable growth, while further tightening control over our costs and the selectivity of our investments,” said Pinault. “We have the right strategy, organisation and talents to achieve these goals.”
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