Kering, the French luxury group that owns brands such as Gucci, Yves Saint Laurent, and Bottega Veneta, reported a 9% drop in sales in the third quarter of 2023 compared to the same period last year. The decline was steeper than expected by analysts and underperformed major rivals such as LVMH and Hermes, which posted sales growth in the same quarter.
Gucci Loses Market Share to Competitors
Gucci, which accounts for over half of Kering’s annual sales and is in the middle of a revamp following a disappointing performance over the past two years, saw a 7% fall in sales in the third quarter. The brand is losing market share to rival labels such as Louis Vuitton and Dior, which recorded sales growth of 9% and 15.6%, respectively, in the same period.
Kering has undertaken a sweeping overhaul at Gucci, reshuffling the brand’s top management and appointing a new creative director, Sabato De Sarno, who unveiled his first collection in September. But De Sarno’s new, minimalist looks, which marked a departure from the label’s eccentric styles that had fallen out of fashion, especially with younger Chinese consumers, will not hit stores before early next year.
Analysts at Citi said that rising economic and geopolitical risks could delay Gucci’s reboot, though they added Kering remained an attractive investment because of the group’s track record in revamping sluggish labels.
Other Fashion Labels Also Struggle to Attract Customers
Kering’s other fashion labels also suffered from a slowing appetite for high-end clothes and accessories, particularly in the United States and Europe. Yves Saint Laurent reported a 16% drop in sales at reported exchange rates, while Bottega Veneta saw a 13% decline. Revenue from Kering’s “other houses” division, which includes Balenciaga and Alexander McQueen, among others, were down by 19% at reported rates and by 15% on an underlying basis.
Kering Eyewear was the only division that charted a significant increase in sales, thanks to the contribution of Maui Jim. The eyewear segment recorded a 34% rise in revenue to reach €331 million EUR.
Kering Remains Confident Despite Challenging Conditions
François-Henri Pinault, chairman and chief executive officer of Kering, said: “Beyond the challenging macroeconomic conditions and softening demand across the luxury industry, the change in our revenue performance in the third quarter reflects the impact of our decisions to further elevate our brands and their distribution.”
Pinault added that the organization that Kering put in place in July “will enable us to strengthen the steering of our Houses in the current market environment and to reclaim our positions and influence.”
Kering shares fell 4% on Wednesday to their lowest since March 2020, dragging down other luxury stocks such as LVMH, Moncler, and Ferragamo. The luxury sector has been hit by slowing demand for fashion and accessories, as well as supply chain disruptions and rising inflation.
