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Highlights:
- Gucci’s revenue dropped 26% year-on-year in Q3, mainly due to weak demand from China.
- Kering now predicts full-year recurring operating income could fall as low as €2.5 billion.
- The company is focused on executing a transformation plan with tightened cost controls.
Kering SA, the owner of iconic luxury brands like Gucci and Yves Saint Laurent, has made a significant reduction to its full-year income forecasts after a tough third quarter marked by sharp declines in revenue. Gucci, the group's flagship brand, saw its year-on-year revenue plummet by 26%, driven primarily by sustained weakness in demand from China, a key market for the luxury sector.
The struggles extended beyond Gucci, with Yves Saint Laurent also reporting a 13% drop in third-quarter revenue. However, Bottega Veneta fared better, showing more resilience with a 4% increase in revenue, bolstered by strong sales in North America and Western Europe. Despite this positive performance, the overall outlook for Kering remains clouded by uncertainty, as luxury consumer demand continues to be impacted by macroeconomic factors.
Kering has significantly revised its forecast for recurring operating income, projecting it could be as low as €2.5 billion for the full year. This is a sharp decline from its previous guidance, which was closer to €3.5 billion. The company attributed this adjustment to "major uncertainties likely to weigh on demand among luxury consumers in the coming months."
François-Henri Pinault, Kering's chairman and chief executive, acknowledged the challenging market conditions faced by the luxury sector, stating, "With discipline and determination, we are executing a far-reaching transformation of the group, and at Gucci in particular, at a time when the whole luxury sector faces unfavourable market conditions. This severely impacts our performances in the short term."
Pinault emphasized that Kering’s primary focus is on building the foundation for a return to sustainable growth. As part of this effort, the company plans to further tighten control over its costs and make more selective investments, prioritizing long-term stability over short-term gains.
Despite the sobering financial outlook, Kering’s shares on the French stock exchange were only down by 0.5% following the announcement, though the stock has already fallen by over 40% year to date. The company’s focus now shifts to navigating these headwinds while continuing its transformation efforts to restore growth across its luxury portfolio.
