French luxury conglomerate Kering reported a challenging second quarter, with group revenues plummeting 15% amid weakening global demand and significant sales drops across its flagship brands. The luxury giant, best known for owning Gucci, revealed financial results that underscore the profound challenges facing the high-end fashion industry.
Gucci, which traditionally accounts for nearly half of Kering’s total revenues, experienced a dramatic 25% sales decline, generating 1.46 billion euros for the quarter. The results fell short of analyst expectations, with total sales reaching 3.7 billion euros compared to the projected 3.96 billion euros.
Chairman and CEO François-Henri Pinault acknowledged the disappointing performance while maintaining a strategic outlook. “Though our current numbers remain below our potential, we are confident that our comprehensive efforts over the past two years have established healthy foundations for future development,” Pinault stated in the earnings release.
The company’s challenges are particularly pronounced in key markets, with significant weakness observed across Japan and the broader Asia Pacific region. Analysts point to mounting economic uncertainties and shifting consumer behaviors as primary drivers of the revenue contraction.
Yanmei Tang, an analyst at Third Bridge, characterized Kering’s current situation bluntly: “Kering is confronting a tough reality as its two primary luxury markets, China and the United States, are experiencing substantial strain.”
Investors have responded cautiously, with Kering’s share price declining 8% year-to-date. The company hopes the recent appointment of automotive industry veteran Luca de Meo as group CEO—effective September 15—will inject new strategic momentum into the organization.
De Meo faces formidable challenges, including potential 15% tariffs on U.S. imports and broader concerns about consumer spending, particularly in the critical Chinese market. Industry experts suggest the more nuanced challenge will involve revitalizing the brand’s image and desirability without alienating its existing consumer base.
The incoming leadership must navigate complex strategic terrain, balancing brand reinvention under new artistic direction—including Gucci’s recent appointment of Demna Gvasalia—with maintaining the luxury brand’s core identity and market positioning.
