Kering at a crossroads: sales fall, but investors believe in a new chapter for Gucci

French luxury conglomerate Kering ended the fourth quarter of 2024 with a 12% drop in sales compared to the same period last year. The biggest losses occurred in the company's flagship brand, Gucci, where the decline was 24%. Despite the alarming figures, analysts believe such results are expected and see signs of stabilization. RBC stressed that the situation may indicate the beginning of recovery.

Kering CEO Francois-Henri Pinault expressed confidence in the future of Gucci, noting that the brand is able to regain lost ground. As part of a renewal strategy, the newly appointed head of Gucci, Stefano Cantino, fired creative director Sabato De Sarno, as part of a plan to rebrand and restore the brand's appeal.

However, experts warn that a change in creative leadership could make it more difficult to quickly return to growth, as Gucci stores are still filled with collections designed by De Sarno. However, Kering says that the update will not slow down the brand's development, and a new designer will be introduced soon.

Gucci's problems are exacerbated by a general decline in demand for luxury goods, especially in China. However, there are also positive signals: sales in the Chinese market increased by 6% compared to the third quarter. According to Bain data & For example, the global luxury goods market shrank by 2% in 2024, largely due to the crisis in the Chinese real estate sector.

Gucci was once a symbol of eccentric style thanks to the vision of Alessandro Michele. However, changing consumer tastes and increased competition from brands such as Louis Vuitton and Dior have required a rethink of the strategic approach.

Despite the downturn, Kering's annual operating profit was 2.6 billion euros, exceeding the forecast of 2.5 billion euros. Nevertheless, the company remains behind the competition: the price-to-earnings ratio is 19 against LVMH's 24 and Moncler's 25. For comparison, Burberry, which is in the process of restructuring, shows an indicator of 60.

Kering shares rose more than 5% in early trading, but then declined, reflecting a cautious market sentiment. Investors are closely watching the company's next steps, waiting for news about the new creative director of Gucci and measures to accelerate growth.

In the long run, Kering hopes to return Gucci to its leading position in the luxury goods industry by focusing on strategic transformation and brand renewal.