After ‘trying’ 2023, Kering guides further losses in 2024

    The owner of Gucci recorded a 4 percent loss in group revenue compared to last year. But are geopolitical tensions and inflationary pressures only to blame?
    Photo: Gucci
      Published   in Finance

    Last year was “trying” for Kering, said François-Henri Pinault, Chairman and Chief Executive Officer, in a statement.

    In the 12 months ending December 31, group revenue fell 4 percent year-on-year on a reported basis, and net profit tumbled 17 percent. In the fourth quarter, revenue was down 6 percent, driven by geopolitical uncertainty and inflationary pressures on global consumers.

    Despite falling behind industry peers, Kering’s figures beat analyst estimates and are an improvement on the third quarter, when group revenue slipped 13 percent.

    “We are focused on revitalizing Gucci, leveraging the unique blend of craftsmanship, Italian heritage, and modernity that characterizes this iconic house,” said Pinault. “The launch of Kering Beauté and the acquisition of Creed, a storied maker of high-end fragrances, will enable us to capture our share of the steadily growing beauty market.”

    China highlights#

    Although the French luxury giant did not break down revenue by region, key brands like Gucci, Yves Saint Laurent, and Bottega Veneta reported improvements in Asia-Pacific, with the latter seeing “encouraging signs,” especially in mainland China.

    China is a pivotal market for the French conglomerate. Among Kering’s top 10 cities in terms of sales globally, five are in China. As such, it has ambitious plans to open at least 10 stores across its diverse brand portfolio in the market every year.

    The group’s emphasis on China is evident from its marketing and retail strategies in 2023. In August, Gucci launched an official digital flagship store on, offering its extensive range of products in addition to online client advisor services and white glove delivery. Kering’s flagship brand also participated in Tmall’s Singles’ Day for the first time, with sales in the first hours of Singles’ Day surpassing its sales from the entire festival last year.

    Gucci celebrated the opening of its store with a selection of gifts for Qixi Festival. Photo:
    Gucci celebrated the opening of its store with a selection of gifts for Qixi Festival. Photo:

    And Chinese shoppers are keeping tabs on the brand. When creative director Sabato de Sarno showed his debut menswear collection in September at Milan Fashion Week, the livestream on Weibo received over 63 million views according to Bernstein, beating Prada’s engagement by 20 percent and Brunello Cucinelli’s by 80 times.

    Gucci revival remains challenging#

    That said, Gucci has also been the source of many concerns for the company. Whereas former creative director Alessandro Michele used maximalist, gender-fluid designs to speak to the next generation of luxury consumers, De Sarno is taking a more practical, subdued approach to luxury. This has elicited mixed reactions in China and around the world.

    “After many Italian brands returned to the old-money minimalist style, the new Gucci seems to have embraced this trend. But unlike Bottega Veneta with its proud weaving and leather craftsmanship, it fails to stand out,” writes Xiaohongshu user @Ran about De Sarno’s debut collection. “The new Gucci only comes up with some well-tailored items that seem too conservative and boring.”

    Looks from Sabato de Sarno’s debut menswear collection for Gucci. Photo: Gucci
    Looks from Sabato de Sarno’s debut menswear collection for Gucci. Photo: Gucci

    Other challenges for Kering include weakening momentum at Saint Laurent and the lower brand strength of Bottega Veneta in China, Barclays analysts wrote in a research note. Although Bottega Veneta had a big win with its star-studded repeat show in Beijing last July — its first physical show in China — its two-year hiatus from Chinese social media may have taken a toll on its visibility. The brand has just 73,000 followers on Weibo, compared to Gucci's 4 million.

    Uncertainties and opportunities#

    Kering’s share price has fallen around 33 percent over the past 12 months. Shares dipped in January after Burberry cut its expectations for 2024, signaling a rocky road ahead for brands undergoing a turnaround.

    In the context of the “normalization of the sector’s growth” and ongoing investments in key brands, Kering expects full-year recurring operating income to decline, particularly in the first half of the year.

    “In a market environment that remains uncertain in early 2024, our continuing investments in our houses will put pressure on our results in the short term,” Pinault said in a statement.

    But not all luxury peers share this fate. LVMH posted organic growth of 13 percent to $93 billion in 2023 compared to 2022, while Brunello Cucinelli grew 2023 revenue by nearly 24 percent to €1.14 billion ($1.24 billion), achieving its goal of surpassing 1 billion euros an impressive five years ahead of schedule.

    In other words, luxury shoppers, including those in China, are showing resilient demand. But as of yet, it is the most expensive luxury goods makers like LVMH and Richemont that are benefiting.

    It’s still early to gauge if De Sabarno will deliver on the reset Gucci needs — Kering’s fiscal 2023 results do not reflect sales of his debut collection, which will arrive in stores in the spring. However, as the conglomerate continues investing in itself and expanding into promising sectors like beauty, it is confident that it can “confirm its status as one of the influential groups in the luxury industry” in the long run.

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