Kering, what’s happening? Gucci’s sales dropped 9% at constant rates in the third quarter of 2023: worse than the forecasted -6% from consensus cited by Bernstein. Beside from Gucci’s difficulties, other brands are also struggling: Saint Laurent -12%, Bottega Veneta -7%, “other brands” (including Balenciaga) -15%. The disappointing results of the third quarter are moving Kering away from rivals LVMH and Hermès: both of these groups are slowing, but remain positive. Just a roadblock or is it crisis?
Just a roadblock or is it crisis?
Beside from a general slowdown of consumption and of the luxury segment, proven by the quarterly data of LVMH and Hermès, Kering is slowed by internal challenges as well. Gucci is undergoing a phase of renewal that will take time. Saint Laurent, writes Business of Fashion, is focusing on handbags with entry-level prices for the luxury segment, thus making itself vulnerable to slowdowns. Balenciaga is meanwhile fighting to recover its strength after the advertisement scandal at the end of 2022. The result: Kering’s revenue in the third quarter was 4.46 billion euro, while for the first 9 months it reached 14.6 billion euro: -2% on a comparable period.
Creating a new base for Gucci
Kering hopes that a more stable identity in the long-term for Gucci will increase the organic growth in coming quarters. How? By attracting a wider range of clients compared to the previous customers active during the Alessandro Michele period. And let’s not forget the brand’s new CEO will not be present right away. “The mission is creating new basis to put the brand back on the right path. Then we will consider searching for a new CEO”, said Jean-Marc Duplaix, Deputy CEO of Kering. The aforementioned also recognized that Gucci will not likely be able to reach its growth targets. Profit levels will also be under pressure due to the high expanses to relaunch the brand (source Financial Times).
Saint Laurent’s losses
The (negative) surprise is Saint Laurent’s down quarter. An even larger loss to that of Gucci, as the brand abruptly stopped its growth path mainly due to two factors. First: the brand’s dependance on aspirational clients, as they have slowed purchases especially in the USA. Second: the lower sales from the wholesale channel.