Kering's value nearly halved in one year

Kering faced a challenging 2024: over the course of the year, the value of its shares almost halved, falling by 40% (though they are now slowly recovering). However, there were some improvements in the fourth quarter, despite the difficulties affecting its flagship brand, Gucci, which accounts for approximately 63% of its total revenue. The annual revenue was €17.2 billion, down 12% both as reported and on a comparable basis. In the fourth quarter, revenue reached €4.39 billion, also recording a 12% decline – a steep drop but less severe than analysts had anticipated, as their projections were far more pessimistic. The Gucci issue remains the main problem, with a 24% drop in organic revenues in the fourth quarter and a 21% annual decline, bringing the brand’s total revenue to €7.7 billion in 2024. However, there are indeed glimmers of hope. Some signals suggest the beginning of a slowdown in the brand’s crisis: firstly, part of the financial loss is due to a progressive and planned closure of multi-brand channels, where sales have practically halved over the past year. This costly shift could pay off in the future. Secondly, the brand’s bags and leather goods have begun to perform in an "encouraging" manner, while the last three months of the year showed sequential improvement in North America and the Asia-Pacific region, suggesting a potential stabilization of the financial downturn. According to estimates by BoF, the brand still relies on outlets for a percentage that could hover around 15%. Ultimately, the brand is maintaining its operating profitability, proving its ability to generate earnings even during tough times: the operating margin of 21% is noteworthy, meaning that for every €100 in sales, the brand retains €21 in operating profit. This remains high even though sales have contracted, confirming the brand’s resilience.

Similarly, Saint Laurent did not particularly shine, with revenue of €2.9 billion in 2024 – a 9% reduction compared to the previous year. In the fourth quarter, revenue dropped by 8%, with a 7% contraction in directly managed retail sales. Leather goods and bags were well-received, although the wholesale channel saw a 35% decline in the quarter. The brand’s recurring operating margin was 20.6%, with recurring operating income of €593 million. A positive note comes from Bottega Veneta, whose revenue increased by 4% in 2024, reaching €1.7 billion. Directly managed retail sales grew by 10% on a comparable basis, while the wholesale channel suffered a 15% drop. In the fourth quarter, Bottega Veneta recorded a 12% revenue increase, driven by outstanding performances in North America and Western Europe. The brand’s recurring operating income was €255 million, with an operating margin of 14.9%. Balenciaga, Alexander McQueen, and Boucheron reported total revenue of €3.2 billion in 2024, down 7% on a comparable basis. Balenciaga performed well in the leather goods segment, while Alexander McQueen suffered due to a creative direction change. The jewelry houses, however, made progress, with Boucheron standing out in particular. Nevertheless, other brands posted a recurring operating loss of €9 million due to negative operating leverage, meaning that losses from the sales decline were not sufficiently offset by cost savings: in other words, sales decreased while fixed costs remained the same, burdening the brands.

Another positive note was the Kering Eyewear and Corporate division, which recorded total revenue of €1.9 billion, up 24% from the previous year. Kering Eyewear generated revenue of €1.6 billion, with a 6% comparable basis growth, driven by all regions and the main brands in its portfolio. The division reported recurring operating income of €277 million. Overall, Kering’s recurring operating income amounted to €2.55 billion in 2024, down 46% compared to the previous year. The recurring operating margin dropped to 14.9%, compared to 24.3% in 2023. Net income attributable to the group stood at €1.13 billion, with earnings per share of €9.2. The three remedies for the group’s struggles are not simple solutions: first, it is essential to restore Gucci’s sales to health; secondly, work needs to focus on “behind-the-scenes” strategies such as distribution, product, and communication; and finally, there must be a focus on cost optimization and careful investment selection. In short, the crisis is significant, but not catastrophic. The decline in revenue, operating margin, and profitability are signs of a significant challenge, but the controlled cash flow, growth of Bottega Veneta and the Eyewear and Beauté activities, as well as the announced strategic measures, leave room for potential and gradual recovery in the coming months.