Kering, the renowned French luxury group, has reported lower-than-anticipated sales for the second quarter of this year. The company experienced a modest growth of only 3% during this period, falling behind its competitors in the industry. The performance of its leading brand, Gucci, is of particular concern as it continues to struggle in its efforts to recover.
According to a Visible Alpha consensus, Kering’s overall sales for the second quarter reached 4.96 billion euros ($5.45 billion), below the market’s expectations for a 6% increase. Gucci, in particular, witnessed a meager sales growth of just 1% during this period. In contrast, other luxury companies, including Kering’s major rival LVMH, have reported double-digit growth. LVMH, for example, observed a remarkable 21% sales increase in its fashion and leather goods division, which encompasses renowned brands such as Dior and Louis Vuitton.
Furthermore, Kering experienced a decline in recurring operating income for the first half of the year. Gucci’s operating income fell by 4%, while Other Houses, which includes renowned brands like Balenciaga, faced a significant decline of 34%. This decrease in operating income resulted in a decline in the operating margin, dropping from 28.4% to 27%. In an effort to support the growth of its weaker brands, Kering has invested heavily in them, which has had an impact on its profitability.
The underwhelming performance of Gucci and other brands within the Kering portfolio poses a significant concern for the luxury group. Kering has been implementing a turnaround plan for Gucci, which was previously a star performer for the company. The group has brought in new creative talent and made strategic changes to breathe life back into the brand. However, these efforts have not yet translated into substantial improvements in sales and profitability.
In order to regain its competitive edge in the luxury market, Kering must address the challenges facing Gucci and its other brands. The company needs to continue investing in marketing and innovation to create products that resonate with consumers. Additionally, a key focus should be on enhancing operational efficiency and cost management to improve profitability.
Overall, Kering’s disappointing sales in the second quarter highlight the ongoing struggles of its leading brand, Gucci, and the challenges faced by its other brands. The company will need to intensify its efforts to revitalize its business and regain the momentum it once possessed in the luxury market.
Useful links:
1. The Business of Fashion
2. Vogue
