Author | Zheng Qiao
Editor | Wang Xiaojuan
On the stage of wealth, former superstars are fading away.
According to the Bloomberg Billionaires Index, François Pinault, the founder of Kering Group, the parent company of GUCCI and YSL, is no longer among the top 100 richest people in the world.
This is the first time he has fallen out of the top 100 since entering the index 12 years ago, currently ranked 105th. In 2021, Pinault was ranked 22nd.
Additionally, LVMH boss Bernard Arnault has also lost his position as the world's richest person, dropping from first to fifth place.
The leaders of luxury brands are slipping, reflecting the consumption winter that the luxury goods industry is struggling to combat.
This trend is also reflected in Kering Group's financial report. The third-quarter performance report for 2024 released by Kering Group shows that the group achieved revenue of €3.79 billion in the quarter, a year-on-year decline of 15%. Among them, the main brand GUCCI's revenue was €1.64 billion, down 25% year-on-year, marking the largest decline this year.
Moreover, YSL, which had stable revenue in previous quarters, also began to decline in the third quarter of this year, with revenue dropping 12% to €670 million. At the same time, other brand departments, including Balenciaga and Alexander McQueen, also saw a decline in revenue.
GUCCI has always been the traffic king and performance driver for Kering Group. From 2015 to 2019, its average annual profit growth rate reached 30%, contributing 70% of Kering Group's operating profit. However, from 2020 to 2022, GUCCI's average annual profit growth rate plummeted, eventually leading to negative growth.
In 2024, GUCCI has issued sales warnings three times, expecting annual profits to fall to the lowest level since 2016.
This reliance on a single brand has also reduced Kering Group's risk resistance. Once a hit in the Chinese market, GUCCI suddenly struggles to sell, and Kering Group is increasingly anxious.
It's not just Kering Group that is anxious; consumers are becoming more cautious, and the global luxury goods industry is experiencing a slowdown in growth, making it tough for the entire industry.
The &#34;2024 Global Luxury Goods Market Study&#34; report jointly released by Bain &amp; Company and the Italian luxury goods industry association Altagamma indicates that global luxury goods sales are expected to reach nearly €1.5 trillion in 2024, remaining basically flat compared to 2023, with year-on-year growth expected to fall between -1% and 1%.
Kering Group is also trying to achieve growth through price reductions. Wall Street Journal learned that some GUCCI products are being sold at low prices in outlet stores; YSL has reduced prices on its best-selling Loulou bags in the U.S. market; and Balenciaga has more than doubled the number of discounted products on Tmall compared to the same period last year, accounting for over 10% of its sales on the platform from January to April.
However, consumers seem unresponsive to luxury price cuts. Significant discounts have always been a taboo for luxury goods, as this can affect the brand's high-end positioning, further deteriorating the brand's image in consumers' minds and leading to the loss of core users
Former Burberry CEO Angela Ahrendts once said that for the luxury goods industry, being &#34;ubiquitous&#34; is the most fatal, which means you are no longer a true luxury brand.
Luxury giants are reluctant to fall from grace, but reality is forcing them to reassess their crowns. Beyond price cuts, they are also making more changes.
In February last year, Kering Group entered the luxury beauty sector by establishing a beauty division, Kering Beauté, and hired a former Estée Lauder executive to lead the division.
At the same time, Kering Group also acquired and invested in high-end perfume brands Creed and Matière Première. The third-quarter financial report showed that Creed experienced strong growth during the reporting period.
Additionally, brands have become aware of the side effects of price reductions. Recently, there have been reports that GUCCI intends to reduce the number of outlet stores in the mainland Chinese market.
Kering Group CEO François-Henri Pinault candidly stated in the third-quarter earnings report: &#34;We are undergoing profound changes across the group, especially at GUCCI.&#34; He emphasized, &#34;Our absolute priority is to create conditions for healthy and sustainable growth while further strengthening control over costs and investment selectivity.&#34;
Kering Group has also adjusted its personnel structure: Balenciaga CEO Cédric Charbit will take over as the new CEO of Saint Laurent, while former Chief Commercial Officer of Saint Laurent Gianfranco Gianangeli will assume the CEO position at Balenciaga.
According to the latest appointments, Charbit and Gianangeli will officially take office on January 2, 2025, and will report directly to Kering Group Vice CEO and current Saint Laurent CEO Francesca Bellettini.
During these challenging growth times, not only Kering Group but also other luxury giants have made several high-level personnel adjustments.
LVMH Group updated its Executive Vice President of Human Resources and Chief Financial Officer positions; CELINE hired Emilie Leblanc as its communications executive after Hedi Slimane's departure; Burberry appointed Paul Price as Chief Product and Merchandise Planning Officer.
Luxury giants hope to reverse the downturn through a major overhaul, but the shift in direction seems difficult to change through individual efforts.
Pinault has fallen out of the top 100 on the global billionaire list, which not only reflects a shrinkage of personal wealth but also serves as a microcosm of changes in the global luxury goods market.
Against the backdrop of increasing global economic uncertainty, competition in the luxury goods industry will become more intense, and Pinault and his Kering Group need to seek new growth points and strategic adjustments to meet market challenges

LVMUY

The overall growth rate of the industry is slowing down

- François Pinault, founder of Kering Group, has fallen out of the Bloomberg Billionaires Index's top 100 for the first time in 12 years, now ranked 105th.  
- Kering's Q3 2024 report shows a 15% revenue decline to €3.79 billion, with Gucci's sales dropping 25%, highlighting the luxury sector's struggles amid cautious consumer spending.  
- As the luxury market faces stagnation, Kering is implementing strategic changes, including leadership adjustments and a focus on sustainable growth, to navigate the challenging landscape.

Luxury goods giants fall from grace