Kering Faces the Gucci Challenge

Administrateur
2 days ago
3 min read

A Luxury Champion in Transition

For two decades Kering has ranked in the global luxury top three alongside LVMH and Richemont. Its portfolio spans iconic fashion and leather-goods houses (Gucci, Saint Laurent, Bottega Veneta, Balenciaga, Alexander McQueen, Brioni), a jewellery division (Boucheron, Pomellato, DoDo, Qeelin), eyewear activities and, since 2023, a nascent beauty arm. In 2022 the group still posted a record €20.4 billion in revenue with 47 000 employees. But momentum reversed sharply: €19.6 billion in 2023 (-4 %) and €17.2 billion in 2024 (-12 %).

Asia-Pacific remains the largest market (~30 % of 2024 sales) ahead of Western Europe (~30 %) and North America (~25 %), leaving Kering highly exposed to Chinese and US consumption swings. On governance, the Pinault family retains 42 % of the share capital and almost 60 % of the voting rights via Artémis, ensuring strategic freedom and continuity.

2023-2024: The Sudden Stop

Sales Slowdown Then Drop

After the post-Covid boom, demand faltered in 2023: adverse currency moves, shrinking wholesale and a lack of blockbuster launches curbed growth. Things worsened in 2024: lower store traffic, softer “aspirational” spending in the US, a sluggish Chinese rebound and an accelerated pull-back from multi-brand retailers drove a 13 % fall in retail sales and a 22 % collapse in wholesale.

Gucci—The Conglomerate’s Achilles Heel

Gucci, supplying roughly half of revenue and two-thirds of operating profit, plunged 23 % in 2024. The creative transition after Alessandro Michele, interim marketing and a partly misunderstood upscale repositioning alienated buyers; Sabato De Sarno’s cleaner aesthetic will not show its full effect until 2025. Every lost growth point at Gucci ripples across the group, making its revival existential.

Compressed Margins: Cost–Revenue Squeeze and Adverse Mix

Group operating margin has slid from 27.5 % (2022) to 14.9 % (2024). Three forces explain the shock:

High fixed-cost base. Flagship openings, glittering renovations (Milan, New York), larger creative teams and sustained marketing could not be resized in line with falling sales.
Shift from wholesale to retail. Curtailing multi-brand sales boosts exclusivity but cuts short-term volumes that once carried high incremental margins.
New strategic projects. Launching Kering Beauty, integrating Creed, preparing the Valentino tie-up and ramping up Eyewear absorb capex and opex before revenue arrives.

Within the top maisons the picture varies: Gucci stays margin leader by size yet loses around ten points; Saint Laurent retreats a third to roughly 21 %; Bottega Veneta, still scaling, sits at 19 %—below sector benchmarks.

Acquisitions & Real Estate: Spending Billions to Seed the Future

Strategic Stake in Valentino

A €1.7 billion purchase of 30 % of Valentino in July 2023 opens a path to full control by 2028. The move diversifies revenue and could add over €2 billion annually, lowering Gucci dependence.

Creed—The Beauty Beachhead

Buying Creed, an ultra-profitable niche perfumer, gives Kering Beauty a global network, industrial know-how and instant scale. It will also ease the eventual repatriation of Gucci and Saint Laurent beauty licences.

The Real-Estate Bet

More than €2.8 billion has gone into prime sites—Fifth Avenue, Via Monte Napoleone, Parisian hotspots—to secure flagship space. Ownership provides architectural freedom and rent stability, but swells the balance sheet just as cash flows tighten.

A Deteriorating Financial Profile

Net debt hit €10.5 billion by end-2024, 2.3 × EBITDA versus 1.3 × a year earlier. Free cash flow halved, while the dividend was slashed from €14 to €6 per share to conserve liquidity. Management is exploring a separate property vehicle to bring in outside investors and ease consolidated leverage. Ratings remain investment grade, yet margin recovery must come soon to avoid pressure.

Identified Growth Levers

Gucci Relaunch. Strong uptake of De Sarno’s collections could swiftly restore sales to pre-crisis €10 billion, boosting group revenue by roughly 30 %.
Rise of Saint Laurent and Bottega Veneta. YSL targets €5 billion by extending its Parisian aura; Bottega’s acclaimed design continues to woo Western and Asian premium buyers.
Integrated Beauty. Creed’s platform will support in-house perfumes and future skincare lines, a high-margin, less cyclical revenue stream.
Jewellery & Accessories. Double-digit growth at Boucheron, Pomellato and Qeelin taps growing female wealth in Asia. An opportunistic acquisition could accelerate this pillar.
Geographic & Digital Expansion. India, South-East Asia and the Middle East hold under-penetrated potential; a unified omnichannel strategy aims to lift e-commerce from 15 % to 25 % of direct sales by 2028.

Conclusion: The Decisive Decade

Kering enters 2025-2030 with formidable assets—craftsmanship, global brands, family control—but outsized reliance on Gucci. Massive investments during the downturn aim to forge new growth engines (Valentino, Creed, real estate), but weigh on profitability and leverage today. Near-term priority is reclaiming Gucci’s desirability and restoring margins; medium-term ambitions hinge on beauty, jewellery and emerging markets for balanced growth. If executed flawlessly, operating margin could rebound above 25 % and leverage trend lower by 2027. The house of five lions now plays the second half of its story; it holds the cards to win—if it plays them right.