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Kering, which, on Thursday, announced plans to acquire 30 per cent of Valentino, said second-quarter sales at megabrand Gucci rose 1 per cent to €2.5 billion, below consensus expectations of 4 per cent. Turnaround efforts — including an executive overhaul — are underway.
In his introductory remarks to analysts on Thursday, chairman and CEO François-Henri Pinault said: “I heard many calls for new brand leadership, some kind of musical chairs at the head of our houses. But what we needed, in reality, was much more than just moving people around; I wanted to change the way we operate over the long term. In fact, in the past decade, we tripled the size of Kering as we leveraged our brands’ desirability and visibility to build their scalability. Having achieved that, we will continue to leverage their desirability and visibility, but at the same time, reinforcing their exclusivity is our top priority. And this requires another set of skills, at the group level, to guide and support the brands.”
He praised Saint Laurent CEO Francesca Bellettini, whom he has just appointed Kering Group deputy CEO, with all brand CEOs reporting to her. “Francesca has done a great job in her 10 years at Saint Laurent, transforming it into a luxury powerhouse, overseeing a successful designer transition, and building a winning management team. Saint Laurent has been the most consistent growth story in the group.”
Overall group sales increased 3 per cent to €5 billion. Saint Laurent revenues grew 7 per cent and Bottega Veneta rose 3 per cent. Kering’s Other Houses division, which includes Balenciaga and Alexander McQueen, reported a sales decline of 1 per cent. “The [Valentino parent company] Mayhoola deal eclipses first-half performance,” writes Bernstein analyst Luca Solca.
Kering is lagging compared to other luxury players. Rival LVMH’s fashion and leather groups division reported a 21 per cent sales increase in the second quarter, while Richemont sales rose 19 per cent in the same period. The Moncler brand was up 32 per cent, and the Prada brand’s retail sales grew 14.7 per cent in Q2.
As aspirational shoppers tighten their wallets in the US, Kering brands were hit harder than others: retail sales growth was down 23 per cent in North America in Q2, while Asia Pacific was up 22 per cent and Western Europe up 4 per cent.
The pressure is on particularly at Gucci, which previously boasted double-digit sales quarters for Kering before hitting a wall in 2022. New leadership is now in motion. Asked about the appointment of an interim CEO at Gucci to replace Marco Bizzarri, Pinault stressed the “urgency” of the situation to build momentum. He noted that interim CEO Jean-François Palus, who is currently Kering Group managing director, is “immediately operational” and knows the organisation “from the inside out”. The search for a permanent CEO will start after the summer. The new CEO “will come from the industry or not; all options are open”, Pinault said.
Meanwhile, Palus will focus on the “amplification” strategy: the company will make sure that the new aesthetic unveiled at Sabato de Sarno’s debut show in September will have an impact immediately and not when products hit stores, Pinault said. “The potential of Gucci, in my opinion, is above €15 billion,” said Pinault. “Jean-François, with the support of Francesca, will focus on the amplification of that new vision in all the touch points of the brand in the stores, campaigns, events, making sure we are not waiting for another six or eight months.”
The deal, announced in July, includes the option for the conglomerate to acquire the rest of the brand by 2028.
Acquisitions were top of mind at Kering in light of the Valentino news and the recent acquisition of high-end heritage fragrance house Creed. Pinault identified areas of potential for the brand, such as women’s fragrance, duty-free channels and e-commerce and said the addition of Creed will help scale Kering Beauté.
Pinault concluded: “I hope that [CFO] Jean-Marc [Duplaix] and myself have convinced you that all of our actions and initiatives contain the seed of future success. The recent changes in our organisation, the Creed acquisition and now, our investment in Valentino, all open to an exciting new chapter in our history. We are very, very enthusiastic about the coming period.”
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