Following yesterday’s release of Kering’s figures for the three months to 30 September 2023; Louise Deglise-Favre, apparel analyst at GlobalData, a leading data and analytics company, offers her view: “Kering has reported another set of disappointing results, with revenue dropping 13.1% in Q3 FY2023 – far behind LVMH which experienced a significant slowdown but still managed to grow 1.1% in the same period. Kering’s year to date performance is now down 2% on the year, as macroeconomic difficulties have finally caught up with the luxury sector after a boom in the past two years. Indeed, inflationary pressures in the US and Europe have continued to inhibit spend among aspirational luxury shoppers, leading Kering’s revenue in North America and Western Europe to drop 21% and 10% respectively. Asia Pacific excluding Japan also experienced a major slowdown in Q3, with sales growing a mere 1%, compared to 11% in H1, while Japan outperformed with sales rising 28%, although this is partially due to its slower recovery from the pandemic, with weaker comparatives last year.
“The group’s largest brand Gucci continued to decline, with sales dropping 14.1%, as the brand remains in a transitory period. Gucci’s new creative director Sabato de Sarno unveiled his first collection for the brand in September to mixed reactions, with some praising the return to a simpler aesthetic, while others decried the designer’s minimalist approach. However, the collection will only arrive in stores in early 2024, meaning Q1 next year will be crucial to measure the commercial success of Gucci’s rebranding and new identity.
“Kering’s other star brands, Saint Laurent and Bottega Veneta, also experienced a sharp slowdown with sales dropping 16.1% and 12.8% respectively. The group’s decision to reduce its number of wholesale partners earlier this year to elevate its exclusivity affected these brands more than others, with wholesale revenue down 38% and 30% respectively. However, a 4% and 2% respective step back in their directly owned sales shows that demand, on the whole, has weakened.
“Q3 also saw the departure of Sarah Burton as the creative director of Alexander McQueen after 13 years and the appointment of Sean McGirr (previously Head of Ready-to-Wear at JW Anderson) as her replacement. This has led to some criticism against Kering, due to the lack of diversity among its creative directors, who are now all white males. There are also concerns that the change at Alexander McQueen could lead to the brand stepping too far away from the late designer’s aesthetic and legacy, which could risk it losing its loyal customers. While the many changes among Kering’s upper management and creative directors might be crucial to get the group out of its rut, it also casts a shadow of uncertainty on its brands, putting it in a vulnerable position amid the current luxury slowdown.”
