Kering warns 30% profit dip after Gucci fails to have a renaissance

Kering, the fashion powerhouse that owns Gucci, Saint Laurent and Bottega Veneta, has revealed that its revenue was down by 11% to £7.5 billion (€9 billion) for the first half of 2024 following a failed attempt at revitalising its star brand Gucci.

The group, which is up against the likes of LVMH and Hèrmes, has shared that its recurring operating income fell by 42% to £1.33 million (€1.58 million) and its net income totalled £738 million (€878 million). Its recurring operating margin was down by 17.5%, due to "negative operational leverage".

As for Gucci, despite its new designer Sabato de Sarno’s positive reception, the brand has yet to have a renaissance since Allesandro Michelle’s departure. Gucci reported an 18% drop in sales to £3.4 billion (€4.1 billion), which outweighed Yves Saint Laurent’s 7% dip to £1.1 billion (€1.4 billion).

Meanwhile, Bottega Veneta, which is arguably one of the current ‘it’ brands, only managed a 3% sales increase to £647 million (€836 million).

Other house revenues in the first half of 2024 were down by 7% to £1.2 billion (€1.7 billion), while Kering Eyewear and corporate segment were £900 million (€1.1 billion), mainly from the activities of Kering Eyewear and Kering Beauté (including the acquisition of Creed).

François-Henri Pinault, Chairman and Chief Executive Officer, said: "In a challenging market environment, which adds pressure on our top line and profitability, we are working assiduously to create the conditions for a return to growth.

"Our Houses pursue their investments to enrich their offer, intensify the impact of their communications, and reinforce the exclusivity of their distribution. We make certain that every one of these investments creates value for the long term. While the current context might impact the pace of our execution, our determination and confidence are stronger than ever."

Looking ahead, Kering said it "prioritizes expenditures aimed at nurturing the desirability of its Houses and maintains strict control over all operating expenses".

To achieve its long-term vision, the company will invest in "the development of its houses", so that they continuously strengthen their desirability and the exclusivity of their distribution.

However, it warned that its recurring operating income in the second half of 2024 could be down by approximately 30% compared to the second half of 2023.