Kering's fourth-quarter sales fall less than expected

Source Credit : Reuters

Kering shares surged on Tuesday after the Gucci owner reported a smaller-than-feared drop in fourth-quarter sales and CEO Luca de Meo pledged growth and wider margins in 2026.

It was the first quarter under the leadership of the former Renault boss, who has promised to restructure the group which has come under intense investor scrutiny for its debt load and sliding profitability during a luxury slowdown.

Kering shares jumped as much as 13% in early trading, lifting European luxury stocks like Moncler, Burberry and LVMH as much as 4%. That added to recent volatility in luxury stocks as investors bet on when the sector will recover from a two-year downturn.

"We will see growth in 2026, we will see increasing margins on all the brands," de Meo told analysts. "With sales trends improving quarter after quarter, the momentum is real - early, fragile, but real. I guarantee you that we will build on it."

That was more optimistic than the recent narrative from peers like LVMH, said Bassel Choughari, portfolio manager at Comgest in Paris.

"De Meo's message, about all the big brands growing and improving their margins, is quite a strong message," Choughari said.

Gucci's sales have slowed and profits have declined since the maximalist styles of former star designer Alessandro Michele fell out of fashion in 2022, and his successor Sabato de Sarno failed to reignite growth. De Meo said Kering had expanded its store network too aggressively while sales were strong, while a 'bonanza' of price hikes had alienated shoppers.



Hopes for a recovery rest on new creative director Demna, who will stage his first catwalk show in Milan at the end of this month.

"Four or five years ago, we were on top of the world, and then something went wrong and we found ourselves on our knees. And now we're starting again," said de Meo.

Kering, which also owns Balenciaga, Bottega Veneta and Yves Saint Laurent, reported sales of 3.9 billion euros ($4.64 billion) for October-December. That was down 3% from a year earlier when adjusted for currency swings, but beat analysts' consensus forecast for a 5% fall, according to Visible Alpha.

Revenue dropped 10% at Italian flagship label Gucci, which accounts for most of Kering's profit, the 10th straight quarterly decline but not as bad as analysts' expectations for a 12% fall.

Gucci saw some improvement at the end of last year in "almost all regions", helped by newly introduced products and handbag sales, finance chief Armelle Poulou said.

Facing an uncertain business outlook, the group last year reduced its store network by 75 boutiques across its brands with further closures planned, Poulou said. Operating costs declined by 9% over the year.

"Kering is just at the start of a multi-year turnaround and the FY25 results should be enough to remind investors of the direction of travel," Deutsche Bank analysts said.

Still, the earnings underscored the steep challenges Kering faces to catch up with peers even though its shares have risen around 50% since de Meo's appointment was announced last June.

Kering's operating income for the whole of 2025 totalled 1.63 billion euros, less than a third of its 2022 level. Its operating profit margin fell to 11% group-wide and 16% at Gucci, down from 28% and 36% three years earlier.

By contrast, LVMH delivered a 22% margin last year, with its leather and fashion division - home to Louis Vuitton and Dior - hitting 35%.

Kering reported a net loss of 29 million euros from continuing operations for the year, saying this was mainly due to restructuring costs. Excluding those costs, net income was at 532 million euros, down from 1.2 billion euros in 2024.