Kering's fourth-quarter sales fall less than expected even as Gucci slide continues

Kering PRTP.PA reported on Tuesday a slightly smaller-than-expected drop in fourth-quarter sales, as new CEO Luca de Meo battles to stabilise the Gucci owner.

It was the first quarter under the leadership of former Renault boss de Meo, who has promised to restore Kering's margins and take bold decisions to restructure the group that has come under intense investor scrutiny.

Sales reached 3.9 billion euros ($4.64 billion), down 3% from the previous year when adjusted for currency swings. That beat analysts' consensus forecast for a 5% drop, according to Visible Alpha.

The revenue drop was 10% at Italian flagship label Gucci, which accounts for most of Kering's profits, versus analyst expectations of a 12% decline.

It was the brand's 10th straight quarter of revenue decline.

Finance Chief Armelle Poulou told journalists Gucci saw some improvement at the end of last year in "almost all regions", helped by newly introduced products and handbag sales.

Grappling with weak sales since the maximalist styles of Gucci's former star designer Alessandro Michele fell out of fashion in 2022, Kering has faced heightened investor scrutiny over its high debt and declining profitability.

Free cash from operations fell by 35% last year when excluding one-off payments from real-estate sales, reaching 2.3 billion euros, Kering said.

Facing an uncertain business outlook, the group, which also owns Balenciaga, Bottega Veneta and Yves Saint Laurent, last year reduced its store network by 75 boutiques with further closures planned, Poulou said.

The earnings underscored the steep challenges Kering faces to catch up with peers even though its shares have risen around 50% since de Meo's appointment was announced last June.

"2025 did not reflect Kering's true potential or the strength of our brands, but it enabled us to lay the foundations for our future recovery," said Poulou.

Kering's annual operating income reached 1.63 billion euros, less than a third of its 2022 level. Kering's operating profit margin fell to 11% group-wide and 16% at Gucci, down from 28% and 36% three years earlier.

By contrast, LVMH delivered a 22% margin last year amid a broader luxury slowdown, with its leather and fashion division - home to Louis Vuitton and Dior - hitting 35%.

TURNAROUND HOPES

Armed with one of the largest pay packages in corporate France, potentially exceeding 20 million euros a year, former Renault boss de Meo has moved quickly to address the group's debt problems and streamline its unwieldy governance structure.

In October, he sold Kering's beauty business and some brand licences to L'Oréal for 4 billion euros, raising cash and securing royalty revenue streams but cutting off a potential future growth leg.

The group further reduced its leverage, with net debt now standing at 8 billion euros, adding to around 5 billion euros of long-term lease liabilities.

De Meo is due to answer questions from analysts at 0700 GMT, likely providing further clues to his strategy revamp to be presented in April at an investor day.

JPMorgan analyst Chiara Battistini said investors welcome de Meo's balance-sheet clean-up, but regaining financial strength hinges on one thing: selling more.

"Driving top line is, I think, the hardest thing to do," she said.

In an internal memo to managers last autumn, de Meo said that sell-through for Gucci's leather goods, or the share of items sold at full price, sat far below rivals Louis Vuitton and Hermes.

"No industrial company can survive producing 3 to sell 1!", de Meo said in the memo.

-Helen Reid and Tassilo Hummel/Reuters