Kering is on pins and needles too

Last night, Kering reported a significant decline in its financial performance, issuing a new profit warning due to a drastic slowdown in luxury spending. In the first six months of the year, Kering's net profit fell by 50% to 878 million euros, below analysts' forecasts of around 930 million euros. Operating profit decreased by 42% to 1.58 billion euros, aligning with April projections, but the group expects a further 30% decline in operating profit for the second half of the year. Jean-Marc Duplaix, Kering's Deputy CEO in charge of operations and finance, expressed concerns about the market volatility, noting that "there was a deterioration in trends in June that is continuing into July. In this very volatile environment, it is very difficult to predict what will happen in August and September, so I will not predict anything regarding trends for the rest of the quarter."

Kering's flagship brand, Gucci, is not performing well: organic sales fell by 19% in the second quarter (analysts expected a 17% drop) while revenues decreased by 20% to 2 billion euros. This slow performance was influenced by a reduction in retail traffic that affected the carry-over collection, which accounts for three-quarters of its revenues in the second quarter. Despite ongoing investments in communications and stores, as well as efforts to improve quality and logistics operations, Francesca Bellettini, Kering's Deputy CEO in charge of brand development, reiterated that the ongoing strategy will not be compromised for short-term gains, stating: "We will not compromise the long term for short-term easy shortcuts." She added that upcoming product launches will be planned with a disciplined communication strategy targeted at the right consumer segments with a particular focus on entry prices. Beyond Gucci, the group's total revenue decreased by 11% in the second quarter, totaling 4.51 billion euros. Regionally, retail revenues decreased by 25% in the Asia-Pacific region, 11% in North America, 8% in Europe, and 2% in other regions, while sales in Japan increased by 27%, driven by Chinese consumers seeking discounts taking advantage of the yen's weakness.

Saint Laurent and Bottega Veneta showed mixed results, with Saint Laurent's comparable sales down 9% and Bottega Veneta's up 4% in the second quarter. The "other brands" division, which includes Balenciaga, Alexander McQueen, and Boucheron, saw a 5% decrease in sales. Nevertheless, Bottega Veneta recorded record revenues in the first half, although its operating profit fell by 28% due to ongoing investments in brand experience, including the opening of a creative and cultural residence in Venice dedicated to the brand's VICs. The eyewear and beauty division performed better, registering a 5% increase in organic sales. To adjust, Kering has decided to postpone non-essential projects and optimize expenses. Despite the challenging market conditions, Kering will continue with its long-term strategy and remains optimistic about strengthening brands like Balenciaga, which maintains good performance and positive consumer engagement.