On Tuesday, luxury conglomerate Kering reported its first-quarter revenue for 2024, revealing a figure of \u20ac3.57 billion, or approximately $3.9 billion, marking a 6% decline on a reported basis and remaining flat on a comparable basis. These figures indicate a degree of stabilization at the group level, yet the underlying narrative remains largely unchanged and deeply challenging for the French luxury titan: its flagship brand, Gucci, continues to be a significant drag on performance. Accounting for roughly 38% of Kering\u2019s total sales, Gucci\u2019s much-anticipated turnaround under new creative and executive leadership is not materializing with the speed or impact investors and analysts had hoped for.<\/p>\n
This performance stands in stark contrast to that of its primary rival, LVMH Mo\u00ebt Hennessy Louis Vuitton, which had reported its earnings on April 13. LVMH posted a robust \u20ac19.1 billion ($20.7 billion) in revenue for the same period, demonstrating a 1% increase on an organic basis. LVMH\u2019s Chief Financial Officer, C\u00e9cile Cabanis, underscored "improved trends across most businesses," illustrating a more resilient and adaptable strategy despite similar macro-economic headwinds impacting the broader luxury sector. The divergence between the two conglomerates highlights Kering\u2019s concentrated exposure to Gucci\u2019s struggles, which overshadow the relative successes within its more diversified portfolio.<\/p>\n
Gucci\u2019s Persistent Challenges and Regional Disparities<\/strong><\/p>\n Gucci\u2019s comparable sales plummeted by 8% in the first quarter, falling short of market expectations and consequently pulling down Kering\u2019s broader fashion and leather goods division by 3%. Armelle Poulou, Kering\u2019s CFO, attempted to frame these results as early signs of progress rather than a setback during the earnings call. She stated, "Stabilization represents an important first milestone and a further sequential improvement," acknowledging that the quarter unfolded "in a challenging and uncertain environment with low visibility and continued pressure on consumer confidence." While Poulou\u2019s perspective aimed to highlight nascent positive shifts, the raw numbers suggest a protracted and arduous path to recovery.<\/p>\n The nuance, however, lies in the geographic distribution of this purported progress. Encouragingly, Gucci is showing signs of life in North America, where sales turned positive, climbing by 9%. This regional rebound is attributed to the introduction of new products and more effective retail execution. Poulou specifically pointed to "strong newness and increasing AUR" (Average Unit Retail), alongside improved conversion rates, adding that "all the effort that we are putting in the product and the retail experience in store is starting to bear fruit." Growth in North America is broad-based, spanning handbags, ready-to-wear, and shoes, with higher-end customers demonstrating greater resilience against economic pressures. This suggests that the brand\u2019s efforts to elevate its offering and refine the customer experience are resonating with a crucial segment of the luxury market in that region.<\/p>\n This tactical success in North America, however, is not a global phenomenon. Crucially, momentum for Gucci remains deeply negative in China, and Europe continues to exhibit weakness. Poulou was candid about this regional disparity, admitting, "We have been suffering in China from the fact that we have our own issues," citing problems related to brand relevance, product alignment, and distribution strategies within the critical Chinese market. This frank assessment underscores the internal challenges Gucci faces in re-engaging a consumer base that has historically been a powerhouse for luxury growth.<\/p>\n The stark divergence between Kering and LVMH is perhaps most acutely visible in China. While Gucci grapples with ongoing declines in the region, LVMH reported a robust 7% growth in Asia, excluding Japan. This growth, as noted by LVMH\u2019s CFO C\u00e9cile Cabanis, was "driven by growth across divisions in China and North Asia," emphatically highlighting the uneven recovery dynamics across the luxury sector and the differing abilities of conglomerates to capture demand in key growth markets.<\/p>\n Kering’s Strategic Overhaul and Background Context<\/strong><\/p>\n Kering\u2019s current predicament, particularly with Gucci, is rooted in a confluence of internal strategic shifts and external market dynamics. For years, Gucci enjoyed a period of unprecedented growth and cultural relevance under the creative direction of Alessandro Michele and CEO Marco Bizzarri. Their maximalist aesthetic and strong brand identity resonated powerfully with a younger, aspirational demographic, propelling Gucci to become Kering\u2019s dominant revenue driver. However, by late 2022, signs of brand fatigue and a perceived lack of novelty began to emerge, leading to the departure of Michele in November 2022 and Bizzarri in July 2023.<\/p>\n This ushered in a new era of transformation for Gucci. Sabato De Sarno was appointed as the new creative director in January 2023, tasked with crafting a fresh vision for the brand. His debut "Ancora" collection, characterized by a more refined, minimalist aesthetic, began its gradual rollout in stores in early 2024, representing a significant strategic pivot for the brand. Simultaneously, Jean-Fran\u00e7ois Palus, a Kering veteran, served as interim CEO for Gucci before Jean-Marc Duplaix was appointed Deputy CEO of Kering in February 2024, reporting directly to Kering CEO Fran\u00e7ois-Henri Pinault, with a clear mandate to accelerate the brand\u2019s turnaround.<\/p>\n In response to its struggles, particularly in China, Kering is deploying a multi-pronged strategy for Gucci. This includes a vigorous push for product resets, focusing on De Sarno\u2019s new aesthetic and introducing region-specific assortments, such as smaller handbags like the Emblem line, typically priced between $1,100 and $2,200, which cater to local preferences and entry-level luxury consumers. Alongside product innovation, localized marketing efforts are being intensified. For instance, the company highlighted its "La Familia" campaign (likely referring to a recent or ongoing initiative, given the original article’s potential typo of "March 2026"), which was adapted with Chinese actors to enhance local engagement and resonance.<\/p>\n Simultaneously, Gucci is optimizing its retail footprint in China. This involves a strategic tightening of its physical presence, closing underperforming stores while simultaneously investing in higher-quality, more impactful locations. This rationalization aims to enhance brand perception, improve profitability per square foot, and ensure that the retail experience aligns with the elevated image Kering is trying to cultivate for Gucci.<\/p>\n Broader Portfolio Resilience and Market Reactions<\/strong><\/p>\n While Gucci\u2019s performance casts a long shadow, other segments of Kering\u2019s business are demonstrating impressive resilience and growth. The company\u2019s jewelry division, encompassing Boucheron, Pomellato, DoDo, and Qeelin, experienced robust growth of 22% in the quarter. This highlights the increasing importance of hard luxury within Kering\u2019s portfolio and signals where significant momentum is currently being generated. Similarly, Kering Eyewear, which produces eyewear for Gucci, Saint Laurent, Balenciaga, and licensed brands like Valentino, saw sales rise by 7%, reinforcing its consistent role as one of the group\u2019s reliable growth engines. However, neither the jewelry division nor eyewear is currently large enough to offset the substantial decline from Gucci, leaving the group heavily reliant on a turnaround that remains uneven and geographically concentrated.<\/p>\n The first quarter also saw some marginal impact from geopolitical disruptions. Sales in the Middle East declined by 11%, shaving approximately 0.5-1% off the group\u2019s total retail performance. However, this external factor is deemed secondary when compared to Gucci\u2019s internal 8% decline, reinforcing the narrative that the brand\u2019s weakness is predominantly attributable to its own strategic challenges rather than broader market volatility.<\/p>\n Despite the challenging numbers, there are early, tactical signs that Kering\u2019s strategies are beginning to yield some positive outcomes. Encouragingly, conversion rates are improving across several regions, including China, even as overall traffic to Gucci stores remains soft. As Poulou noted, "Traffic is still soft for Gucci in many regions, but what is encouraging is that conversion is going up." This suggests that existing customers are responding more favorably to the brand\u2019s renewed offerings and retail experience. The key challenge, however, remains the inability to attract significant new demand, which is essential for scaling growth.<\/p>\n Market analysts, however, remain cautiously pessimistic. Luca Solca, a prominent analyst at Bernstein, characterized the quarter as a "reality check." In a post-earnings note, Solca articulated the growing gap between corporate narrative and tangible performance, writing that "it is easier and faster for the market to believe in a revival than it is for management to produce it." Adding to the skepticism, Kering\u2019s ongoing strategy of tightening Gucci\u2019s retail footprint, with more than 100 Gucci locations slated for closure this year, creates an additional drag on sales precisely when the brand is striving to rebuild momentum and market presence.<\/p>\n The Road Ahead: Capital Markets Day and Future Outlook<\/strong><\/p>\n The focus for investors and industry observers has now shifted to Kering\u2019s Capital Markets Day, which took place in Florence on April 16. At this pivotal event, Kering CEO Fran\u00e7ois-Henri Pinault (correcting the earlier erroneous reference to Luca de Meo, who is the CEO of Renault, not Kering) was expected to provide a comprehensive outline of the group\u2019s refreshed strategic plan. This plan aims to revive growth, enhance operational efficiency, and strengthen the entire brand portfolio. A key imperative for Pinault and his leadership team is to convincingly demonstrate how demand for Gucci can return to scale, particularly in the crucial Chinese market.<\/p>\n The challenge for Kering and Gucci is not merely about reversing a sales decline; it is about reigniting brand desirability and relevance in a highly competitive and rapidly evolving luxury landscape. The "Ancora" collection, under Sabato De Sarno, represents a significant creative gamble, moving away from the highly distinctive and widely recognized aesthetic of the Michele era. While LVMH\u2019s brands, such as Dior, have shown a faster conversion from product resets to renewed demand, Gucci\u2019s journey appears more protracted. The effectiveness of Kering\u2019s retail optimization, localized marketing campaigns, and product assortment strategies will be critical in determining whether Gucci can regain its footing and contribute positively to Kering\u2019s overall performance, transforming the current narrative of stabilization into one of sustainable growth. The coming quarters will be a true test of Kering\u2019s strategic acumen and its ability to execute a complex, multi-faceted turnaround for its most influential brand.<\/p>\n","protected":false},"excerpt":{"rendered":" On Tuesday, luxury conglomerate Kering reported its first-quarter revenue for 2024, revealing a figure of \u20ac3.57 billion, or approximately $3.9 billion, marking a 6% decline on a reported basis and remaining flat on a comparable basis. These figures indicate a degree of stabilization at the group level, yet the underlying narrative remains largely unchanged and …<\/p>\n","protected":false},"author":13,"featured_media":5261,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[131],"tags":[134,491,492,133,132,488,135,484,3,485,493,490,489,486,487],"class_list":["post-5262","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fashion-technology-and-innovation","tag-ai","tag-amidst","tag-broader","tag-e-commerce","tag-fashiontech","tag-gucci","tag-innovation","tag-kering","tag-luxury","tag-navigates","tag-slowdown","tag-stalls","tag-turnaround","tag-uneven","tag-waters"],"_links":{"self":[{"href":"http:\/\/fashionstudio.info\/index.php\/wp-json\/wp\/v2\/posts\/5262","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/fashionstudio.info\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/fashionstudio.info\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/fashionstudio.info\/index.php\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"http:\/\/fashionstudio.info\/index.php\/wp-json\/wp\/v2\/comments?post=5262"}],"version-history":[{"count":0,"href":"http:\/\/fashionstudio.info\/index.php\/wp-json\/wp\/v2\/posts\/5262\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/fashionstudio.info\/index.php\/wp-json\/wp\/v2\/media\/5261"}],"wp:attachment":[{"href":"http:\/\/fashionstudio.info\/index.php\/wp-json\/wp\/v2\/media?parent=5262"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/fashionstudio.info\/index.php\/wp-json\/wp\/v2\/categories?post=5262"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/fashionstudio.info\/index.php\/wp-json\/wp\/v2\/tags?post=5262"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}