PARIS (Reuters) – Kering reported on Thursday a 4% decline in its fourth quarter turnover on a comparable basis, a performance nevertheless considered reassuring by the market, and warned of a decline in its current operating profit in 2024 due to investments dedicated to relaunching its sales.
The decline in the fourth quarter was less significant than that observed in the previous quarter (-9%), thanks in particular to a sequential improvement in North America and Western Europe.
Sales of flagship brand Gucci fell 4% like-for-like, after a 7% decline in the previous quarter. Sales of other brands Yves Saint Laurent (-5%) and Bottega Veneta (-4%) also declined but less markedly than in the third quarter.
“Gucci is not performing worse than expected, which is a relief,” observes Piral Dadhania, analyst at RBC.
On the Paris Stock Exchange, Kering rose 3.6% to 404.3 euros at 11:07 a.m. when the CAC 40 gained 0.61% at the same time.
The luxury sector has been facing a slowdown in demand in Europe and the United States for several months and a sluggish recovery in China, the traditional engine of growth in the industry.
Kering is also facing the slowdown of Gucci, which represents half of its turnover and which the group hopes to relaunch with the new artistic director Sabato de Sarno appointed a year ago.
The reception to Sabato de Sarno’s collections is “definitely very encouraging,” deputy general director Jean-Marc Duplaix said during a conference call.
Kering is also planning investments to ensure the long-term growth of its brands, which will weigh on its profitability this year.
“In a context where growth in the sector is expected to continue to normalize, the impact of this investment strategy will weigh on the group’s annual current operating profit, which should be down compared to the level published in 2023, particularly in the first half,” warned the group.
Last year, current operating profit stood at 4.75 billion euros, down 15%.
“While management announced a further deterioration in operating profit, we do not believe this is a big surprise given the macroeconomic environment and the need to continue supporting the repositioning of the brand Gucci,” analysts at Barclays estimate.
The big rival LVMH reported last week organic growth of 10% in its turnover in the fourth quarter, a performance welcomed by the market. The other competitor Hermès will publish its accounts on Friday.
(Written by Blandine Hénault, with Mimosa Spencer and Federica Mileo, edited by Bertrand Boucey and Kate Entringer)
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