Kering has been the sick man of the luxury for a while now. Their participation in the post-pandemic luxury top-line growth party was substantially less than that of many of its competitors (e.g., revenue growth in 2021 was 10 percentage points lower than LVMH) and the revenue buying glow faded faster with Kering reporting negative sales growth in 2023 when the rest of the industry was still growing. In the last year, there has been CEO turnover at Gucci, YSL, and BALENCIAGA. And let us not forget that Sabato De Sarno left Gucci last week after less than two years. As an instinct, I normally write that Gucci comprises about half of Kering’s group revenues. But, after a 23 percent collapse in FY24, Gucci now kicks in 44 percent.
It is a sign of Kering’s times when the market mostly shrugged off today’s results. As of the time of writing, Kering’s intraday share price is actually up over 100 basis points, lifting its YTD by 3.4 percent. This is well below the 13 percent gain for our FSW Markets All Luxury Index, but it shows that the market mostly expected today’s results and perhaps was somewhat cheered by the dedication to make FY25 a year of stabilization.
So how low did it go? Revenues were down 12 percent year-over-year when recurring operating income was down 46 percent. Operating margins collapsed from 24.3 percent in 2023 to 14.9 percent last year. Looking at the decomposition of gross margins, top-line growth was down 12 percent, gross margin rate (revenue remaining after subtracting the costs of goods sold) was down 2 percent, FX/hedging was down 3 percent, while scope was up 2 percent, which presumably was due to the continued integration of Creed into the Kering portfolio. However, these margins really stand out in an industry where operating margins typically fall in the 25-35 percent range. Free cash flow was down 27 percent (though this looks better if you exclude real estate transactions), while net financial debt rose almost 25 percent with acquisitions of buildings in New York and Milan.
Much has been written about what has gone wrong at Gucci and Kering and what it will take to return to industry norms. Today’s report leaned heavily into FY25 being about stabilizing the income statement – in effect, hitting a trough. We will see.
You can find the full report here: https://lnkd.in/emf9sUzb
You can reach how we ranked Kering brands against competitors in content effectiveness in our 2025 industry preview here: https://lnkd.in/gEesD7eJ