Kering, the French luxury group, reported a larger-than-expected decline in third-quarter sales, falling behind its major competitors as its flagship brand Gucci and other fashion labels grappled with waning demand for high-end clothing and accessories.
Gucci, responsible for more than half of Kering’s annual sales and currently undergoing a revamp following two lacklustre years, experienced a roughly 7% drop in sales. Smaller brands, which had previously enjoyed strong growth, also saw a decline in quarterly revenues, with Saint Laurent reporting a 12% fall and Bottega Veneta down by 7%.
Apart from the deteriorating macroeconomic conditions, Kering’s performance is influenced by the company’s decision to bring distribution in-house by reducing wholesale sales to reduce promotions and elevate the positioning of its labels, as explained by Deputy CEO Jean-Marc Duplaix.
Rising inflation and economic uncertainty have subdued the appetite for luxury goods among consumers after years of robust demand, prompting investors to reduce their exposure to the industry and revise forecasts. However, Kering’s performance lags behind its competitors.
LVMH, the world’s largest luxury group and one of Europe’s most valuable companies, also reported a slowdown in third-quarter sales this month, although it still recorded an overall increase in revenues, with sales at its fashion and leather goods division rising by 9%. Additionally, Hermes, known for its Birkin bags, reported a 15.6% increase in sales on Tuesday.
Kering is currently in the midst of an extensive overhaul aimed at revitalising Gucci, which has struggled to capitalise on the strong post-pandemic rebound in luxury goods sales and lost ground to competitors like LVMH’s Dior and Louis Vuitton. This overhaul includes changes in the brand’s top management and the appointment of a new creative director who introduced a style reset on the Milan runway in September. These minimalist designs, a departure from the eccentric styles that had fallen out of favour, especially with younger Chinese consumers, are expected to reach stores in early 2023.
