Kering, a French luxury empire and a key player in the industry, is currently facing significant challenges. The company issued a profit warning to the market after citing a 10% decline in sales in the first quarter of 2024 compared to previous expectations. The downturn is mainly attributed to poor performance in the Asian market, particularly China, by its flagship brand Gucci.
The company’s struggles have had a significant impact on the stock market, with shares plummeting by up to 12% in one session in response to poor quarterly figures. This decline resulted in a loss of over 6 billion euros in market capitalization, marking one of the worst sessions in the company’s history. Over the past year, Kering has seen its shares lose 35% of their value.
Despite reporting total turnover of 19.566 million euros and net profit of 2,980 million euros for 2023, which represents a decrease of 4% and 17%, respectively compared to the previous year, Pinault described the year as “difficult.” The difficulties faced by Gucci have contributed significantly to these challenges. The slow economic recovery in China following strict COVID-19 measures has affected consumer confidence and discretionary spending. This has particularly impacted Gucci, which accounts for more than half of Kering’s sales and profits.
In response to these challenges, Kering has initiated a reorganization focused on its main brand Gucci. The company aims to regain momentum by implementing changes such as appointing new leadership and introducing new collections. The success of these strategies will be critical for the company’s future performance and its ability to reduce dependency on Gucci. Additionally, Kering has ventured into new areas such as launching a beauty division and making strategic acquisitions in the luxury sector as part of its long-term strategy to diversify its portfolio and strengthen its position in the market.
In conclusion, despite facing significant challenges due primarily to poor performance in China’s luxury market by flagship brand Gucci; Kering remains optimistic about its future growth prospects through reorganization efforts at Gucci and diversification initiatives that strengthen its position within the luxury sector’s long-term strategy.
