Kering Posts Lower Than Expected Results with a Significant Q3 Drop of 9% on a Comparable Basis

For Q3 2023, Kering posted weaker than expected results with group revenue amounting to €4,464 million, representing a drop of -9% on a comparable basis and -13% on a reported basis. For the 9 months of 2023, Kering revenues dropped by -2% at comparable rates and -3% at reported rates. The pronounced drop in revenues was experienced across all brands except for Kering Eyewear. While the revenues of luxury giants in general have been slowing, Kering came in with a performance well below its competitors for Q3.???

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The biggest among Kering’s brands, Gucci, experienced a sizeable drop of -14% on a reported basis.? While sales in the retail network dropped by -7%, wholesale revenue fell by -17% driven to a large degree by the ongoing wholesale rationalization in its distribution network, at the same time as Gucci is undergoing a significant turnaround.?

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At Saint Laurent and Bottega Veneta, which had experienced robust growth in previous years, a similar drop was felt with a decrease in revenues at Saint Laurent on a comparable basis of -12% and a -7% comparable drop at Bottega Veneta. At Saint Laurent, in particular, the wholesale clean-up contributed to a -38% decline in wholesale revenues. Similarly, while the drop in retail was small at Bottega Veneta, the wholesale revenue decline amounted to -30%.?

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Smaller brands experienced a decline of -15% on a comparable basis. Showing mixed results, Balenciaga experienced negative impacts in Western markets but good momentum in APAC and Japan. Meanwhile, high jewelry, especially Boucheron, performed well.??

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In terms of regional performance in Q3, Western Europe and North America, showed significant slowdowns with declines of -10% and -21%, respectively. Japan held its outperformance with an increase in revenues of +28% from tourism, while APAC remained in positive territory with a +1% increase, showing a somewhat stable demand for Kering’s products, with Hong Kong and Macau performing very well.?

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A combination of a difficult macro environment, weaker luxury demand and hence less traffic both in-store and online, and a wholesale rationalization effort across brands left a marked impact on the company in Q3. In addition, Gucci finds itself in the middle of a major overhaul to recapture the market share lost to its rivals in the post-pandemic environment due to its underperformance in the last two years. As part of its brand elevation and retail expansion, Kering added 28 directly operated stores in Q3 2023.?

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Management emphasized its focus on brand elevation through its fashion shows, investments in brands, and retail elevation, as well as the opening of landmark locations. At Gucci, management reiterated the need and commitment to focus on product elevation and design (upcoming Ancora collection), tighter control of distribution, operational efficiency, and resource allocation. Since the implementation of strategies is ongoing, management is not expecting significant upticks for year-end 2023, but expressed confidence in the long-term success of these measures.?