By Florence Loeve

PARIS (Reuters) – The French luxury group Kering reported on Wednesday a 14% drop in turnover in the first quarter of 2025, its flagship brand Gucci struggling with persistent difficulties in an uncertain global economic climate.

Also the mother house of Saint Laurent and Balenciaga, Kering has a turnover of 3.9 billion euros for the three months until March, a drop of 14% both in published data and comparable, including a 25% decline for Gucci.

These results prove to be below market expectations: a consensus of analysts compiled by Visible Alpha and quoted by HSBC anticipated an organic decline of 9.7%, including a drop of 19.3% for Gucci.

In the first quarter of 2025, Gucci represented around 40% of the group’s sales.

“As we had anticipated, Kering was faced with a difficult start to year,” said President and Chief Executive Officer François-Henri Pinault in a statement.

“We redoubled a vigilance to overcome the macroeconomic turbulence that affects our industry and I am convinced that we will get stronger from the current situation,” he adds.

During a conference with analysts on Wednesday, financial director Armelle Poulou said to expect a two -digit drop in the second quarter, but less than in the previous quarter, and that the second half should be better than the first.

As part of the “optimization” plan of its network, Kering closed 25 shops during the first quarter, the financial director said on Wednesday during a call with journalists, adding wanting to improve the “quality” and “exclusivity” of the network.

“We have the feeling of making great progress,” replied Armelle Poulou to a question about the lack of attraction of customers for Gucci. The financial director has cited the “performance of novelties”, “far superior” to that of permanent products.

“We remain in the expectant concerning the title, until the new artistic director of Gucci (DEMNA) presents his first collection, probably towards the end of 2025,” said RBC analysts in a note on Wednesday.

Luca Solca, analyst of Bernstein, wrote that this first trimester “disappoints weak expectations”.

“Gucci’s rebirth has not yet appeared and will probably face a more difficult context, while the demand of consumers of luxury products is weakening,” he added.

Growing pressure

Kering is subject to increasing market pressure after a series of results on results last year. Its action has lost more than 60% of its value since the first warning in March 2024.

This pressure should probably increase in a disturbed political and economic context. Some investors are indeed turning to groups deemed more resilient, because relying on a more wealthy clientele, such as Richemont and Hermès.

In February, François-Henri Pinault said Kering would not transfer his production sites in the United States to adapt to customs duties. He had differentiated himself from his counterpart Bernard Arnault, who said that LVMH should increase his American production in the event of surcharge – his group also already producing in the country.

Kering had undergone a new setback on mid-March, lowering up to almost 10% after the announcement of the appointment of Demna Gvasalia, who calls himself Demna, as new artistic director of his flagship brand, Gucci. Several analysts have been dubious about this choice.

Demna Gvasalia will not “throw everything away to start from scratch” but “will be based” on what Gucci has already done, said the Deputy Director of the Francesca Bellettini group at the conference with analysts.

From 168 million euros in 2021, Kering’s net debt inflated up to 10.5 billion euros in 2024, due to a series of expensive real estate acquisitions adding to participation in the British perfumer Creed and the Roman brand Valentino.

SLOW-DOWN

Faced with an unprecedented decrease in its growth rates due to the gloom of the Chinese market, the luxury industry counted on wealthy Americans to revive its growth.

But the announcement by US President Donald Trump of massive customs duties in early April caused a fall in world stock markets and recession fears in the United States.

“We consider that we have the ability to protect our margins through price increases, while actually paying attention to consumer feeling” in the face of such increases, said Armelle Poulou.

The French giant and a great competitor of Kering, LVMH, brutally dropped on the stock market on April 15, losing up to around 8%, after the announcement of sales lower than expectations for the first quarter.

Their Rival Hermès, on the other hand, announced a turnover up 7% at constant exchange rates a few days later, slightly below expectations but distinguished from the rest of the industry.

(Written by Florence Lève, with Tassilo Hummel and Mimosa Spencer, edited by Sophie Louet and Augustin Turpin)

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