Kering SA, the parent company of Gucci, released its earnings report on Thursday, revealing a decrease in the appeal of Gucci products to high-income consumers. The brand's revenue declined by 4% in the fourth quarter of last year, and Kering SA expects a decrease in its operating profit this year.
According to the report, the group's recurring operating profit dropped by 15% to €4.75 billion ($5.12 billion), falling short of analysts' expectations. François-Henri Pinault, CEO of Kering SA, warned that the company's investments in brands like Balenciaga would put pressure on the group's performance in the short term. The company predicts a decline in recurring operating profit this year compared to 2023, especially in the first half, and emphasizes the need to maintain &#34;vigilance and discipline&#34; in its cost structure.
Pinault admitted that 2023 would be a challenging year and that the performance did not meet the group's expectations. &#34;We are focusing on revitalizing Gucci,&#34; he said.
However, Kering SA's stock price rose by up to 5.6% on the Paris stock market on Thursday, as some investors were reassured by Pinault's focus on addressing Gucci's issues. Data shows that Gucci accounts for about two-thirds of the group's profits, and the brand's performance is not worse off.
Analysts believe that Gucci's performance is poor but not catastrophic, and this level of underperformance was expected.
Luxury goods manufacturers are adapting to a more stable consumption level among their high-income customers in the post-pandemic surge in demand. Consulting firm Bain &amp; Company predicts that the luxury goods industry will grow by a maximum of 4% this year, only half the growth rate of last year.
Kering SA's stock performance this year has lagged behind competitors such as LVMH. The earnings reports of Richemont, the parent company of Cartier, and LVMH last month showed that their strongest brand sales, although slowing down, remained resilient. In addition, Hermès International will release its earnings report on Friday, with expected revenue growth.

PPRUY

Due to poor sales of Gucci, its parent company Kering Group saw a decline in fourth-quarter revenue and expects a decrease in operating profit for this year as well.

Deteriorating demand for luxury goods, Gucci's parent company Kering reports weak sales in the fourth quarter