Kering’s Profit Plummets as Gucci Struggles in Asia: A Close Look at the Luxury Giant’s Challenges

Kering is a French luxury empire that has been facing challenges for some time. The company issued a profit warning to the market due to a 10% lower than expected sales evolution in the first quarter of 2024. This downward trend has been attributed to poor performance in the Asian region, particularly in China, where its flagship brand Gucci is struggling.

The financial struggles of Kering have had a significant impact on the stock market, with its shares dropping by 12% in a single session after the profit warning. Over the past year, the company’s shares have lost 35% of their value. Despite achieving a turnover of 19,566 million euros in 2023, the company experienced a 4% decrease in revenue compared to the previous year. The net profit also witnessed a 17% decline, amounting to 2,980 million euros.

To address these challenges, Kering has initiated restructuring efforts focused on revitalizing Gucci. The company has made strategic changes such as appointing a new president, Jean-François Paulus, and introducing a new artistic creator, Sabato de Sarno. These changes are crucial in determining the success of Kering’s future performance especially in China where Gucci contributes significantly to their sales and profits.

Apart from restructuring efforts at Gucci, Kering has also expanded its portfolio by launching a beauty division and investing in other luxury brands like Creed and Valentino. These strategic moves aim to diversify the company’s revenue sources and lessen its dependence on Gucci. However short-term results may be impacted by these investments as acknowledged by the company’s leadership.

The challenges faced by Kering are not limited to China alone as they have affected other regions too but it is clear that they need immediate attention if they want to bounce back from this difficult year as described by Pinault.

Overall it’s important for Kering to keep an eye on its long-term strategy while taking steps to mitigate short-term losses caused by these challenges.