Kering’s Profit Collapse: A Temporary Setback or a Luxury Reckoning?
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Kering’s latest financial report isn’t just about numbers—it’s about survival. Luxury is cooling off, Gucci is struggling, and the competition is fiercer than ever. But beneath the headlines, the data tells a deeper story.
With operating margins nearly cut in half, a 62% drop in net profit, and Gucci’s revenue plunging 23%, this isn’t just a ‘slow quarter’—it’s a full-blown restructuring moment for one of the biggest names in fashion. Yet, while some brands are in free fall, others are quietly thriving.
So, is Kering’s decline a temporary slip, or are we witnessing a fundamental shift in luxury? Let’s break it all down—who’s winning, who’s losing, and what this means for Kering’s future.
1. Income Statement Analysis (Profit & Loss)
This is where we assess profitability and growth trends.
Revenue Growth (Top-Line Performance)
Revenue: €17.2 billion (-12% YoY) → This is a significant decline.
Why it matters: We want to look at whether a company is growing, stagnant, or declining.
Normal or Not?
A 12% drop is substantial, signaling a weaker luxury market and internal brand struggles.
Compare to peers like LVMH, Hermès, and Richemont—if they are still growing, it’s a Kering-specific issue.
What Stands Out?
Gucci is underperforming → -23% YoY revenue decline.
YSL also dropped → -9% YoY.
Bottega Veneta is a bright spot → +6% YoY.
Kering Beauty & Eyewear grew strongly (+24%) → This aligns with the Lipstick Effect (when people spend less on luxury but still buy beauty & accessories).
Investment Takeaway:
Declining revenue = Risk for investors.
Need to compare to peers → Is this a sector-wide slowdown or just Kering?
Gucci needs a turnaround, fast.
Operating Income & Profit Margins (Efficiency)
Operating Income: €2.55B (-46% YoY)
Operating Margin: 14.9% (vs. 24.3% in 2023)
Why It Matters?
Margins tell us how profitable the company is after operating costs.
A margin drop from 24.3% to 14.9% means higher costs, lower pricing power, or weaker sales efficiency.
What Stands Out?
A nearly 50% drop in operating profit is a major red flag.
It suggests Kering is losing profitability faster than expected.
Could be due to higher costs, discounting, or restructuring expenses.
Investment Takeaway:
Margins falling means Kering is struggling to maintain profitability.
If competitors (LVMH, Hermès) maintain stable margins, Kering is losing efficiency.
Net Income & EPS (Bottom-Line Profitability)
Net Income: €1.13 billion (-62% YoY)
Earnings Per Share (EPS): Down 62%
Why it matters?
Net income = final profit after all expenses.
EPS is key for investors—it determines stock attractiveness.
What Stands Out?
A 62% drop in net income is significant → Kering is not just losing sales, it’s losing profitability at a high rate.
Stockholders will react negatively → Weak EPS often means lower dividends and weaker investor confidence.
Investment Takeaway:
Investors will want answers on Gucci’s turnaround & cost control.
Stock price may take a hit if profitability doesn’t stabilize.
2. Balance Sheet Analysis (Financial Health & Stability)
Here is where I analyze assets, debt, and overall financial strength.
Debt & Liquidity (Can Kering Survive Financially?)
Net Debt: €10.5 billion (+24% YoY)
Why it matters?
Debt rising too fast = potential risk.
Higher debt means higher interest payments → if profits keep dropping, Kering might struggle to cover obligations.
What Stands Out?
Kering spent heavily on real estate (luxury flagship stores).
Issuing bonds to raise liquidity → Signs of long-term confidence but short-term cash pressure.
Investment Takeaway:
Debt growing faster than profits = concern.
Kering must prove it can generate enough cash to service debt.
Free Cash Flow (Most Important for Sustainability)
Free Cash Flow (FCF): €1.4B
Why it matters?
FCF tells us if Kering can survive downturns.
Positive FCF means Kering can cover its expenses without raising debt.
What Stands Out?
FCF remains positive (€1.4B), so Kering is still financially stable.
However, it’s lower than previous years, meaning less financial flexibility.
Investment Takeaway:
Positive FCF is a good sign, but declining FCF is concerning.
If this trend continues, Kering may need to cut costs or raise prices.
3. Segment Analysis: What’s Driving Growth or Decline?
Which divisions are strongest and weakest?
Gucci (Biggest Problem)
Revenue: -23% YoY
Operating Income: -51% YoY
Why it matters?
Gucci is Kering’s flagship brand (~44% of revenue).
If Gucci struggles, Kering struggles.
What Stands Out?
Gucci’s new creative direction is not yet working.
Consumer demand is shifting away from Gucci’s aesthetic.
Investment Takeaway:
Gucci MUST recover for Kering to stabilize.
Watch for sales trends & leadership strategy shifts.
Saint Laurent (Declining)
Revenue: -9% YoY
Why it matters?
Still a strong brand, but losing momentum.
Wholesale pullback + weaker luxury demand = decline.
What Stands Out?
If Saint Laurent stabilizes in 2025, Kering has a chance at recovery.
Marketing & product shifts are key to track.
Bottega Veneta (Bright Spot)
Revenue: +6% YoY
Why it matters?
Bottega’s quiet luxury positioning is working.
Stable growth despite a luxury slowdown = strong brand resilience.
Investment Takeaway:
Bottega is becoming more important to Kering.
Expect continued investment in this brand.
2025 Outlook & Challenges
Kering expects a gradual stabilization in 2025, but recovery will take time.
Key Focus Areas:
Reviving Gucci: A new artistic direction & CEO will be critical.
Strengthening Brand Exclusivity: Focusing on direct retail sales and premium product strategies.
Expanding Kering Beauty & Eyewear: These divisions are growing fast and can offset declines in fashion.
Managing Costs & Debt: With rising debt, cost control and profitability restoration are priorities.
Looking at this data, Kering is at a crossroads. Gucci is in urgent need of reinvention, Saint Laurent has lost momentum, and rising debt is becoming harder to ignore. But thankfully for Kering, Bottega Veneta and beauty are proving that smart brand positioning still work. The next 12 months will determine whether Kering can turn things around—or if it falls even further behind LVMH and Hermès.
One thing is clear - luxury isn’t what it was in 2022. As we have seen… consumer behavior is shifting, the ‘quiet luxury’ movement is changing brand power dynamics, and not everyone is keeping up. Kering needs to execute flawlessly—or risk fading into the background of the luxury world.
Access to Kering full report here.
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