Gucci sales plummet! Kering Group's performance continues to be sluggish, with profits dropping 46% last year

Gucci's quarterly sales plummeted, dragging down Kering Group's performance last year, as the group struggles to shake off long-term weak demand.

On Tuesday, Kering Group, the parent company of Gucci, released its performance report for last year, revealing that sales of its largest brand, Gucci, continued to be sluggish, with comparable sales in the fourth quarter down 24% year-on-year, exceeding analysts' expectations of a 22% decline, and annual revenue falling 51% to €1.6 billion.

This result led to a 12% decline in Kering Group's organic sales in the fourth quarter to €4.39 billion, with recurring operating profit for 2024 dropping sharply by 46% to €2.55 billion, marking a new low since 2016. Gucci contributed nearly two-thirds of the profit.

In terms of stock performance, Kering Group's shares have risen 2.5% this year, but are still down about 70% from their peak in 2021. In contrast, the stock prices of LVMH and Hermès have risen approximately 8% and 18% this year, respectively.

Kering Group's predicament reflects the challenges faced by the entire luxury goods industry. Competitors like LVMH, the parent company of Louis Vuitton, are also affected by the slowdown in demand for high-end bags and clothing. Hermès, regarded as the most resilient brand, will release its financial report this Friday, and its performance is highly anticipated.

To revitalize the brand, changes in designers have also failed to turn the tide. Kering Group announced last week that Gucci designer Sabato De Sarno has left the company after just two years. De Sarno's minimalist designs did not resonate with consumers. This was the first major decision made by the new CEO Stefano Cantino. History shows that Gucci tends to perform better when it launches bold and innovative designs.

Kering is facing challenges, with Chief Financial Officer Armelle Poulou stating that although the Chinese market is still in negative growth, the company has seen a slight improvement trend in the Chinese and North American markets in the fourth quarter compared to the third quarter. To control costs, Kering has implemented a hiring freeze and supply chain cost-cutting measures. Additionally, the company plans to reduce its exposure to real estate assets and lower its debt levels through partnerships with funds