Kering, the parent company of Gucci, has seen its shares soar by 11% following the announcement of a new strategic vision from its recently appointed CEO, Luca de Meo. This surge comes despite the company reporting another quarter of declining sales, particularly from its flagship brand, Gucci, which continues to struggle under the new leadership.
In a luxury retail environment where competition is fierce, Kering stated that it anticipates a rebound in growth this year, even as fourth-quarter results revealed a 3% drop in sales on a comparable basis, totaling 3.9 billion euros (approximately $4.64 billion). Interestingly, this figure was slightly above analysts' estimates according to FactSet, suggesting that the decline was not as severe as feared.
Gucci's performance in the last quarter showed a 10% decrease in sales, although this was slightly better than what many industry experts had expected. Other brands within Kering's portfolio, such as Yves Saint Laurent, Bottega Veneta, and Balenciaga, either maintained stable sales or experienced modest growth year-on-year.
"The year 2025 did not meet our expectations," remarked CEO Luca de Meo during an earnings call. "It certainly did not showcase the full potential of Kering, and we are all aware of that reality."
In terms of overall performance, Kering reported that total sales for 2025 dropped by 10%, bringing in 14.7 billion euros. The company's recurring operating income fell sharply by 33% compared to the previous year, with the operating margin decreasing to 11.1%, attributed to weaker sales figures.
Despite these challenges, Kering's stock experienced a dramatic increase of up to 14% at one point, settling at an 11% rise by the end of trading. However, it is worth noting that the stock is still down nearly 14% since the beginning of the year, indicating ongoing volatility in the luxury retail sector.
This positive reaction also positively influenced the wider luxury market, lifting stocks of competitors like Burberry, which rose by 3.4%, and Hermès, which increased by 3%. Italian brand Brunello Cucinelli saw a gain of 2.7%, while the French conglomerate LVMH and Switzerland's Richemont climbed by 1.4% and 2%, respectively.
Like many luxury fashion companies, Kering has faced significant hurdles in recent years, particularly following a boom in demand during the COVID-19 pandemic that resulted in price increases that, in turn, alienated many customers. Coupled with decreased consumer spending in China—a crucial market for luxury goods—and a series of strategic missteps, Kering's fortunes have taken a downturn.
To combat these challenges, Kering has appointed Demna as the artistic director of Gucci, a move intended to revitalize sales and restore the brand’s prestigious reputation. His debut collection, titled "La Famiglia," was unveiled last year to much anticipation.
Market observers are now keen to see if De Meo’s efforts—his unexpected appointment marked the first time the company has hired a CEO from outside the organization—will yield tangible results. Coming from an automotive background, De Meo previously revitalized Renault, making him a figure of interest as he seeks to apply similar strategies to Kering.
Analyst Luca Solca from Bernstein commented on Kering's recent performance, suggesting that there are signs of improvement across the brand's portfolio. "The critical question now is whether this can lead to a turnaround for brands like Gucci in the fiscal year 2026, as the consensus currently hopes," he said.
Looking ahead, Kering has expressed optimism about returning to growth and improving margins by 2026, though details remain scarce at this stage. A more comprehensive long-term plan is expected to be shared during the company’s Capital Markets Day set for April.
De Meo assured investors that decisive actions have been taken since the latter half of last year to realign the company’s trajectory, although he acknowledged that they are still "far from" their ultimate goals. One significant step he has taken is to reduce the company’s debt load, including the sale of its beauty division to L'Oréal for 4 billion euros to streamline operations and focus on core fashion lines.
"Our goal is straightforward: to reignite desirability and pave the way for the next growth cycle, house by house, product by product, client by client," De Meo stated emphatically.
Moreover, he indicated that Kering is exploring opportunities in the wellness and longevity sectors, areas where he believes significant value and growth can be achieved. Additional details regarding the company’s jewelry strategy will also be unveiled in April.
Jefferies analyst James Grzinic noted that the closing stages of 2025 show a gradual alleviation of pressures at a time when industry conditions appear to be more favorable. Investors are eager to hear De Meo’s initial assessments, especially regarding potential cost-saving measures, which are anticipated to be a focal point in his future strategy.
