Over the past decade, luxury group Kering has been making significant investments in real estate, acquiring properties such as the future Gucci flagship store in Paris and the Canadian embassy building in Paris. These acquisitions have sparked questions about Kering’s strategy in real estate, particularly in response to criticism from Bernard Arnault, the CEO of LVMH, the leading luxury goods group in the world.
During Kering’s annual results presentation, Jean-Marc Duplaix, deputy CEO, and François-Henri Pinault, CEO, discussed their approach to these real estate investments. Duplaix clarified that they acquire exceptional assets in select cities because they believe it adds value to their brands. Pinault emphasized that Kering does not intend to become real estate developers and that their investments are solely focused on brand elevation strategies. They are only interested in acquiring buildings that align with their brand’s development strategy.
For Kering, these real estate investments are crucial in competing with other luxury houses, particularly those within the LVMH group who are acquiring large flagship stores in the world’s most affluent shopping streets. Pinault stressed that their goal is to strengthen the exclusivity and upscale positioning of their brands by securing ultra-premium locations for their growth in revenue.
However, while the amounts invested in real estate are significant, Kering also recognizes the importance of investing in expertise, technology, and training to validate their luxury positioning in jewelry and leather goods. To mitigate their exposure to the real estate market, Kering is exploring collaborations with financial partners, which would allow them to be more agile and free up capital for other opportunities. The successful trial run of this strategy can be seen in their partnership with an investment fund for the Omotesando building in Tokyo.
Kering may further pursue agreements with investment funds to secure prime locations while minimizing their involvement in real estate operations. However, the current financial environment may not be favorable for such arrangements, and it could take one to two years for these partnerships to materialize. The article concludes by emphasizing that it remains uncertain which fashion house under the Kering group will benefit from the prime location acquired on Fifth Avenue in New York.
Useful links:
1. Kering’s sustainability initiatives
2. Kering’s commitments
