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Kering has laid out a strategy to lure high-net-worth individuals as its sales continue to falter.
On Thursday, the French luxury conglomerate said its sales fell 4 per cent in the fourth quarter ending 31 December — slightly better than analyst expectations of a 5 per cent decline. Shares were up 4.6 per cent in afternoon trading.
Still, Kering’s fourth-quarter performance lagged behind its biggest rival. LVMH said its sales were up 10 per cent on a comparable basis in the same period, with its fashion and leather goods division growing 9 per cent. Zegna Group sales grew 19.6 per cent.
As the aspirational clientele is under pressure, Kering is investing in an elevation strategy across its houses that includes improving its branding, enhancing the in-store client experience and furthering its sophisticated product offering. “We will make sure our houses will get the full support they need for their journey,“ François-Henri Pinault, chairman and chief executive officer, said during a media conference. “We are a group that has firepower with aspirational clientele and consequently the more sophisticated, mature segment is less developed than for some competitors who are positioned in timeless [luxury].” Kering deputy CEO Jean-Marc Duplaix said communications spending will increase at least in the double digits.
Sales at Kering’s largest brand, Gucci, were down 4 per cent year-on-year in Q4, in line with expectations, while Saint Laurent’s sales fell 5 per cent and Bottega Veneta was down 4 per cent. Sales at the Other Houses division, which includes Balenciaga and Alexander McQueen, were down 5 per cent in the quarter. Kering’s eyewear sales were a bright spot: up 7 per cent.
By geography, growth came from Asia Pacific (up 8 per cent year-on-year in Q4) and Japan (up 13 per cent), while sales were down 8 per cent in Western Europe and 11 per cent in North America.
For the 2023 full year, Kering’s revenue was down 2 per cent to €19.6 billion. Gucci’s sales were €9.9 billion, Saint Laurent €3.2 billion, Bottega Veneta €1.6 billion and Other Houses €3.5 billion (including €1.8 billion for Balenciaga). The group’s full-year EBIT for 2023 came out 2 per cent below expectations (€4.75 billion versus consensus of €4.84 billion).
All eyes are now on the arrival of Gucci creative director Sabato De Sarno’s first collection in stores. Pinault noted a “very good sign of traction” as De Sarno’s debut products exclusively hit the refurbished flagship on Milan’s Via Monte Napoleone. They are rolling out to other stores this month and, by June, the whole assortment will have been designed under his creative direction.
Meanwhile, Jean-François Palus, who was appointed interim CEO of Gucci amid an executive shake-up in July 2023, has been installed in the role permanently. “Jean-François has proven to be a great leader… He’s leading the show,” Pinault said, adding that new talents are joining the house following the appointment of Massimo Vian, head of industrial operations and supply chain, who was previously COO of Prada.
Analysts cautiously expressed hope for an improvement in the group’s fortunes. “Kering’s results were not worse than expected,“ Bernstein analyst Luca Solca wrote. “While the CEO flagged further losses to come, the presentation focused on the vision for the company going forward. Gucci’s September collections should be in store in the coming weeks, which should finally provide a sense of the turnaround.”
He noted, however, that Bottega Veneta hasn’t benefited from the “full tailwinds of a quiet luxury demand environment”. (On the house’s muted performance, despite its positioning at the higher end of luxury, Pinault said: “We don’t want growth rates that are too high. We hold the reins.”)
“Focus is now on 2024, including Gucci’s turnaround [and] P&L trajectory, Saint Laurent’s possible evolution, signs of recovery at Balenciaga and M&A (Creed, Valentino, buy-back of Gucci’s beauty licence and eyewear acquisitions),” said Thomas Chauvet, head of luxury goods equity research at Citi.
Also coming up, Alexander McQueen’s new creative director Seán McGirr will present his first collection during Paris Fashion Week.
Kering’s management also offered an update on the beauty division formed a year ago, and helmed by Raffaella Cornaggia. Kering Beauté will launch its first fragrances, a very high-end collection of fragrances by Bottega Veneta in 2024, followed by Balenciaga and Alexander McQueen fragrances in 2025. Meanwhile, jewellery brand Boucheron — which is enjoying “double-digit growth” — will enter the US market in 2024.
Asked about the impact of the US elections, Kering deputy CEO Francesca Bellettini expressed caution. “When there are elections, there’s uncertainty especially on the aspirational clients segment,” she said. “We are cautious, but if the US economy rebounds, we’ll benefit from it too, I guarantee you,” Pinault said.
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