Paris (AFP) – Gucci owner Kering reported a sharp drop in 2024 earnings on Tuesday, days after parting with its flagship brand’s creative director in a bid to revive the struggling fashion house. Its share price was flat in afternoon trading in Paris after surging in opening deals as its fourth-quarter results were better than feared.
The French luxury group, whose other brands include Yves Saint Laurent, Bottega Veneta, and Balenciaga, said its net profit fell 62 percent to 1.13 billion euros ($1.16 billion) last year compared with 2023. Sales retreated 12 percent to 17.2 billion euros, with a notable decline of 23 percent at its Italian brand Gucci alone, bringing in 7.65 billion euros.
“We have demonstrated in the past that we know how to grow brands, and we will do it again,” Kering chief executive Francois-Henri Pinault said at a results presentation. “Gucci will come back. I have absolutely no doubts about this,” he stated. Gucci parted ways with its creative director, Italian designer Sabato De Sarno, last week after a collaboration that lasted two years and failed to turn things around at the fashion label known for its handbags with the double G logo.
Pinault emphasized that by “focusing on what we can control, we’ve made the necessary decisions to improve our situation, to gradually restore the health of Gucci.”
Kering’s operating margin—the percentage of revenue retained as profit after covering operating expenses, excluding tax and interest—stood at 14.9 percent in 2024, down from 24.3 percent in 2023. In the fourth quarter, group sales totaled 4.4 billion euros, down 12 percent from the same period in 2023, despite improvements in key markets China and the United States, according to chief financial officer Armelle Poulou. Gucci sales sank 24 percent to two billion euros in the last three months of 2024.
Kering shares jumped five percent after the Paris stock exchange opened as its fourth-quarter earnings were better than expected by analysts, but they were flat in afternoon deals. “We are for sure still far from where we want to be,” Pinault acknowledged. “But we are confident that we have reached an inflection point and that after a year of stabilization in 2025, we will gradually resume a trajectory of steady and increasingly profitable growth.”
Gucci enjoyed high-flying growth between 2015 and 2019, with revenue rising threefold over that period. Its sales topped 10 billion euros in 2022 under the direction of designer Alessandro Michele. However, Gucci sales declined six percent in 2023, a massive blow to Kering, as the brand accounted for almost half of its revenue and two-thirds of its operating profit. The global slowdown in the luxury sector in 2024 exacerbated Gucci’s challenges.
In October, Kering promoted Stefano Cantino, a former Louis Vuitton director, to the post of chief executive at Gucci to replace Jean-Francois Palus. Cantino had been named deputy to Palus just six months earlier. In another leadership shuffle, Gucci announced the departure of creative director De Sarno last week. De Sarno was appointed in January 2023, bringing in a more minimalist style to the flashy Florence-based brand after replacing Alessandro Michele. A successor has yet to be named.
“The transition phase is over. We are now in a restart phase,” Pinault said, adding, “that goes through a new artistic direction.”
© 2024 AFP
