Kering’s quarterly is nightmarish. But, at last, faith can be placed in the group’s recovery, as Gucci focuses on leather goods for revival. Meanwhile, a tears and blood approach is needed: layoffs, store closures, and contract renegotiations are Kering’s strategies to protect margins. The group has issued a profit warning stating that it forecasts an operating income of about 2.5 billion euros at the end of 2024, almost half of what it was in 2023.
Gucci: struggling today, may do better tomorrow
Gucci remains the group’s big sickie. In the third quarter its revenue amounted to 1.6 billion euros (-26% at current exchange rates and -25% on a comparable basis). A result lower than analysts expected (-21%). Nevertheless, Kering has confidence in the brand. “The new handbag offering is proving very successful among our customers in terms of design and functionality”, Kering CFO Armelle Poulou told BoF, confirming the good feelings anticipated by Mytheresa.
“The perception of quality is higher. Sabato de Sarno’s collections are being well received by our existing customer base”. De Sarno’s products accounted for 35% of Gucci’s revenue in the third quarter, up from the 25% share from three months ago. The group has assured that, by the end of the year, all of Gucci’s products will be those designed by the creative director. “The challenge is to continue to intensify the recruitment of new customers, and this is also related to the economic environment and the decline in store traffic”, Poulou added.
Nightmarish quarterly
In Q3 2024, Kering’s revenue was €3.8 billion, -15% at current exchange rates and -16% on a comparable basis. Beside from Gucci, Yves Saint Laurent’s revenue amounted to €670 million (-13% at current exchange rates and -12% on a comparable basis). Bottega Veneta’s 397 million (+4% and +5%) thanks to “the exceptional success of leather goods”, the group stressed in the press release. Revenue from “other maisons” (686 million) fell 15% and 14% on a comparable basis. Kering points out how “Balenciaga’s leather goods lines performed very well”. For the first nine months of the year, Kering generated revenue of 12.8 billion euros, down 12%. The reported results are worse than the analysts’ worst estimates. According to a unanimous estimate in a Barclays’s comment, cited by Reuters, analysts expected an 11% decline.
And now, cuts
WWD writes that Kering is preparing to counter the announced halving of operating profit with a drastic cure: layoffs, store closures (in China) and contract renegotiations. In this regard, Poulou concluded, “We have increased efficiency and productivity in retail through staff reductions, especially at Gucci”.
Photo from gucci.com
