In a remarkable turn of events, Kering, the parent company of Gucci, experienced an 11% surge in its stock price after the new CEO, Luca de Meo, outlined his ambitious plans for revitalizing the brand and the overall company. This comes despite the fact that Kering reported another quarter of declining sales, primarily driven by Gucci's underperformance during De Meo's initial quarter in charge.
Kering, which also owns prestigious brands like Yves Saint Laurent, Bottega Veneta, and Balenciaga, announced that its fourth-quarter sales fell by 3% on a comparable basis, totaling approximately 3.9 billion euros (around $4.64 billion). Interestingly, this figure slightly exceeded analysts' expectations according to FactSet.
Gucci, Kering's flagship label, witnessed a 10% decline in comparable sales during the same period—also marginally better than market predictions—while other brands within Kering's portfolio experienced stagnant or moderate growth year-on-year.
Reflecting on the challenges faced, CEO Luca de Meo remarked, "2025 was not the year we aimed for; it didn’t showcase Kering's full potential, and we are all aware of it." Overall, Kering's sales dropped by 10% to 14.7 billion euros, with recurring operating income plummeting by 33% compared to the previous year, leading to a decline in its operating margin down to 11.1% due to disappointing sales figures.
Following the announcement, Kering’s shares soared as much as 14%, ultimately closing up 11%. However, it is important to note that the stock has decreased by nearly 14% year-to-date.
This optimistic sentiment extended beyond Kering, positively influencing the broader luxury market. Notable gains were observed among competitors: Burberry saw a 3.4% increase early in trading, while Hermes and Italy's Brunello Cucinelli rose by 3% and 2.7%, respectively. Additionally, shares of French luxury conglomerate LVMH climbed by 1.4%, and Switzerland's Richemont gained 2%.
Like many of its counterparts, Kering has suffered setbacks in recent years, following a surge in demand during the COVID-19 pandemic, which led to significant price increases that alienated some customers. The weak consumer demand from China, once a crucial growth engine for the luxury sector, coupled with strategic blunders, has seen Kering's fortunes wane.
To counter these challenges, the appointment of Demna as Gucci's artistic director aims to boost sales and restore the brand’s reputation. His debut collection, titled "La Famiglia," was launched last year and is anticipated to make a significant impact.
The market is keenly awaiting evidence that De Meo's strategies to rejuvenate Kering are starting to take effect. Notably, De Meo, who previously led a turnaround at the struggling automotive giant Renault, was an unexpected choice as the company's first external CEO.
As analyst Luca Solca from Bernstein noted, "These results indicate a slight improvement across Kering's diverse brand portfolio and activities. The critical discussion will revolve around whether this marks the beginning of a shift towards growth for brands like Gucci in FY26E, as current consensus suggests."
Kering expressed optimism about a "return to growth and margin enhancement" in 2026, although specific details regarding future projections were sparse. A more comprehensive long-term plan is expected to be disclosed at the upcoming Capital Markets Day in April.
De Meo emphasized that decisive actions have been taken since the latter half of the past year to redirect the group's trajectory, although he acknowledged that there remains considerable ground to cover before achieving desired outcomes.
One of the key initiatives has involved reducing the company's debt levels and divesting its beauty segment to L'Oréal for approximately 4 billion euros. This move is part of a strategy to alleviate high net debt burdens and refocus on Kering's core fashion operations.
“Our objective is straightforward: to reignite desirability and prepare for the next growth cycle, house by house, product by product, and client by client,” de Meo stated.
Furthermore, he highlighted Kering's plans to enter the wellness and longevity market, identifying it as a promising area for future value and growth creation. Details regarding the company's jewelry strategy are also set to be unveiled in April.
Jefferies analyst James Grzinic noted that Kering's closing stages of 2025 reflect gradually diminishing pressures amid more favorable industry conditions. Investors will undoubtedly be eager for insights into De Meo's initial evaluations, especially regarding cost-saving potentials that could become a significant focus.
