Dive Brief:
- Kering forecasted an operating income decline of between 40% and 45% year over year for the first half 2024, according to its Tuesday earnings report.
- The company said in its release that the projected H1 drop was due to investment in its ongoing brand development strategy and an “ongoing normalization of the [luxury] sector’s growth.” For Q1, revenue was down 11% to 4.5 billion euros, or approximately $4.8 billion, after previously projecting a 10% drop for the quarter in March.
- Gucci, Kering’s largest house, reported Q1 revenue of 2.1 billion euros, representing a 21% drop for the quarter, after previously projecting a 20% decline. Meanwhile, Yves Saint Laurent revenue dropped 8%, driven by “tough market conditions” in the Asia-Pacific region. Bottega Veneta dipped 2%, with double-digit wholesale declines.
Dive Insight:
Kering’s losses are deepening. In February, the firm reported fourth quarter declines of 8% at each of its fashion houses, as well an overall fiscal 2023 revenue drop of 4% to 19.6 billion euros. Last month, the company’s negative earnings update reflected the headwinds it continues to face in light of luxury’s uneven climate.
“Kering’s performance worsened considerably in the first quarter,” François-Henri Pinault, chairman and CEO, said in Tuesday’s release. “While we had anticipated a challenging start to the year, sluggish market conditions, notably in China, and the strategic repositioning of certain of our Houses, starting with Gucci, exacerbated downward pressures on our topline. In view of this revenue decline, together with our firm determination to continue investing selectively in the long-term appeal and distinctiveness of our brands, we now expect to deliver sharply lower operating profit in the first half of this year.”
Q1 revenue dropped in Kering’s directly operated retail network “as a result of lower store traffic” and wholesale revenue was also down, which the company said was a result of its efforts to “strengthen the exclusivity of its Houses’ distribution.”
Total revenue for its other fashion houses was down 7% overall, although Kering reported double-digit growth for Balenciaga in North America and overall double-digit growth for Brioni and jewelry house Boucheron. In addition, the company, which did not release specific numbers for every brand, noted that Alexander McQueen was in the midst of “its creative transition.”
The Kering Eyewear and Corporate segment, including its Beauté division, were a bright spot, with combined revenue up 24% to 536 million euros.
The company will report first half results on July 23.
