Kering Suffers Revenue Decline as Gucci Fails to Match Hermes and Brunello Cucinelli Sales

Kering's Gucci and other major brands see significant revenue downturn amid changing fashion trends and economic pinches, as the company maneuvers strategic shifts towards exclusivity and self-distribution.

Kering SA reported a 9% drop in its Q3 sales, sharply contrasting with Hermès International SCA and Brunello Cucinelli SpA who surpassed expectations and upgraded revenue forecasts. The performance difference is attributed to Gucci's appeal to younger, fashion-enthusiastic shoppers in the US and China, a demographic now suffering from inflation and higher borrowing costs.
The group's biggest brand, Gucci, accounting for about half of sales and about two-thirds of operating profit last year, is transitioning to a more refined elegance under the lead of new top designer Sabato de Sarno. Gucci's organic sales fell 7% in the third quarter, further than the 6.2% expected by analysts.
Yves Saint Laurent, another brand in Kering's portfolio, reported a 12% decline in organic sales in the third quarter. Competition from LVMH’s Celine and Loewe and waning spending from customers in North America and western Europe have been pointed out as reasons for the decline.
Kering is making strategic shifts to adjust to the current luxury market trends, emphasizing Gucci's reinvention, developing Saint Laurent despite facing competition, and focusing on exclusivity for Bottega Veneta. It will rely on its own retail distribution over wholesale and work towards increasing its appeal to the super-rich.
While Kering's shares fell 5% in early trading after the announcement and are down about 17% this year, the company is hopeful. François-Henri Pinault, Kering’s chairman and CEO, stated that the recent changes will enable Kering to reclaim its “position and influence,” in the market and achieve growth despite macro-economic headwinds.