Kering financial report: Gucci sales decline analysis

French luxury group Kering announced today that it struggled to stem declining sales at its flagship Gucci brand in the fourth quarter, even as it pointed to early signs of improvement in the critical Chinese market amid a broader shake-up of the Italian fashion house. Sales at Gucci plunged 24% YoY to 1.92 billion euros ($2.1 billion) in the fourth quarter, worse than analyst expectations of a 19% decline, as the brand continued to lose ground to rivals like Louis Vuitton and Dior. The disappointing performance led Kering last week to part ways with Gucci’s creative director Sabato De Sarno after less than two years, throwing its turnaround efforts into question. Kering's full-year profit plunged 62% YoY to 1.1 billion euros ($1.2 billion), highlighting the depth of challenges facing the luxury group. Overall revenue fell 12% YoY to 4.39 billion euros ($4.53 billion), slightly ahead of forecasts. Early signs of recovery in China’s luxury market? The French multinational’s shares rose 3% today as investors focused on hints of recovery in China, where Chief Financial Officer Armelle Poulou noted a six-point sales improvement between the third and fourth quarters. “In a difficult year, we accelerated the transformation of several of our houses,” Chairman and Chief Executive Officer François-Henri Pinault said in a statement. “We have driven Kering to a point of stabilization, from which we will gradually resume our growth trajectory.” The results highlight Gucci’s dramatic fall from grace after years as luxury’s fastest-growing major brand under former creative chief Alessandro Michele. De Sarno’s more minimalist approach failed to resonate with consumers, especially in China, a crucial market for Gucci's growth. Gucci’s fall from grace: The need for creative revival “The brand needs to return to bold, unapologetic creativity,” wrote Daniel Langer, CEO of luxury consultancy Équité and professor at Pepperdine University, in a recent Jing Daily opinion article. “Playing it safe was playing to lose.” For now, Kering is leaning on bright spots elsewhere in its portfolio. Bottega Veneta posted 12% growth in the fourth quarter, while Saint Laurent’s decline moderated. But with Gucci accounting for nearly half of group sales and two-thirds of profits historically, stabilizing the brand remains crucial.

Kering’s profit drops 62% amid Gucci’s decline

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Kering’s profit drops 62% amid Gucci’s decline