Kering CEO Notes "Fragile" Recovery Amid Smaller-Than-Expected Gucci Sales Decline

• Kering's annual operating income fell to 1.63 billion euros, less than one-third of its 2022 level, with operating profit margins dropping from 28% to 11% group-wide and from 36% to 16% at Gucci over three years
• CEO de Meo sold Kering's beauty business to L'Oréal for 4 billion euros to address debt problems, with net debt now standing at 8 billion euros plus 5 billion euros in long-term lease liabilities
• The company reduced its store network by 75 boutiques with more closures planned, while Gucci saw improvement in 'almost all regions' helped by new product introductions and handbag sales

Kering Reports Q4 Results: Gucci Decline Moderates in "Fragile" Recovery

Key Financial Results:

Kering reported Q4 sales of €3.9 billion ($4.64 billion), down 3% year-over-year on a currency-adjusted basis, beating analyst expectations of a 5% decline. Flagship brand Gucci experienced a 10% revenue drop—its tenth consecutive quarterly decline—but outperformed the anticipated 12% fall.

Annual operating income reached €1.63 billion, less than one-third of 2022 levels. Operating profit margins compressed significantly to 11% group-wide and 16% at Gucci, down from 28% and 36% respectively three years earlier. The company reported a €29 million net loss from continuing operations, though adjusted net income was €532 million, down from €1.2 billion in 2024.

Leadership and Strategic Actions:

New CEO Luca de Meo, formerly of Renault, is leading a multi-year turnaround focused on margin restoration and cost reduction. Operating costs declined 9% annually, and Kering reduced its store network by 75 boutiques with further closures planned.

In October, De Meo sold the beauty business and brand licenses to L'Oréal for €4 billion to address balance sheet concerns. Net debt currently stands at €8 billion, plus €5 billion in lease liabilities.

Market Challenges:

Kering lags competitors significantly—LVMH delivered 22% margins with its leather division hitting 35%. Internal issues persist, including Gucci's excess inventory production problem. De Meo acknowledged the recovery remains "early, fragile, but real," citing improvement from new products and handbag sales across most regions.

Outlook:

Analysts view these results as early evidence of turnaround progress, though driving revenue growth remains the critical challenge ahead.