Kering Earnings Analysis Shows Steep Decline in Sales and Profits

Kering's latest earnings report has some alarming numbers that caught my attention. Kering's sales declined by 17.5% in the first quarter of 2023.

The luxury goods conglomerate's revenue drop is a significant concern, especially considering the brand's reputation for high-end products. Kering's Gucci brand, for example, saw a 13.8% decline in sales.

This steep decline in sales is a major red flag for investors and analysts. Kering's profits took a hit as well, with a 26.2% decrease in operating income.

Kering's earnings report for the first half of 2025 shows a challenging market environment.

The company's revenues decreased by 16% on a reported basis and 15% on a comparable basis, reaching €7.6 billion.

Kering's operating profit for the period was €969 million, with an operating margin of 12.8% (down 4.7% year-on-year).

The net profit attributable to the group was €474 million, a significant decrease from €878 million in H1 2024.

Here are the key metrics from Kering's earnings report:

The company's operating free cash flow in the first half year was €2.4 billion, with €1.3 billion coming from real estate disposals.

Bottega Veneta delivered a positive performance in 2024, with revenue rising to €1.7 billion, up +4% reported and +6% like-for-like.

The brand's directly operated retail network sales increased +10%, while wholesale revenue declined -15%, reflecting the highly selective approach to partnerships. Wholesale revenue declined -10%, however trends in Asia Pacific improved and the demand for the house's leather goods remained strong.

Bottega Veneta achieved recurring operating income of €255 million, with a recurring operating margin of 14.9%, as it continued investments in communications and store expansion.

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Japan was the strongest region for Kering Group, with revenues up 9% like-for-like, driven by increased tourist spending from the rest of Asia due to the weak yen.

The rest of Asia Pacific (excluding Japan) saw a decline in revenues, falling 24% due to lower local demand in Greater China and shifting tourist purchasing patterns.

The region's share of total group revenue declined from 35% to 30%.

Western Europe's revenues declined 9%, impacted by softer local demand and a normalization of tourist traffic.

Southern Europe outperformed Northern Europe, but a more exclusive wholesale strategy weighed on overall performance.

North America's sales were down 11% due to economic uncertainty leading to weaker consumer spending.

However, demand in the ultra-luxury segment remained resilient, with revenue still 35% higher than in 2019.

The rest of the world recorded modest 3% growth, driven primarily by strong demand in the Gulf countries.

Gucci's performance was heavily impacted by a 26% decline in revenue, with a 42% slump in the wholesale channel and a 24% decline in retail sales.

The brand's recurring operating profit was €486 million, with a margin of 16%, down 8.7 percentage points year-on-year.

Gucci's wholesale revenue plummeted -53% due to a sharper focus on selectivity in distribution.

Yves Saint Laurent generated sales of €1.3 billion in the half year, with a 20.4% recurring operating margin.

Bottega Veneta was the only brand to perform against the trend, with revenues amounting to €846 million, a 1% increase on a reported basis and 2% comparable.

The brand's retail sales grew by 3%, while wholesale sales declined by 3%.

Kering's sales fell 16% on a comparable basis to €3.79 billion in the third quarter of 2024.

Revenue at Gucci slumped 25% to €1.64 billion.

Bottega Veneta delivered a positive performance in 2024, with revenue rising to €1.7 billion, up +4% reported and +6% like-for-like.

The brand achieved recurring operating income of €255 million, with a recurring operating margin of 14.9%.

Kering's financial health has been a topic of interest, and we can see that their leverage (debt/EBITDA) has fluctuated over the years, ranging from 0.32x in 2022 to 2.25x in 2024.

One notable aspect is the company's ability to generate cash flow, with a cash flow per share of €38.4 in 2024, a slight increase from €36.43 in 2023.

Here are some key financial metrics for Kering:

Kering's profitability has also been affected by changes in the market, with a net margin of 6.59% in 2024, down from 15.25% in 2023.

As we dive into the projected income statement of Kering, let's start with the revenue growth. Kering's revenue is expected to decline by 27.14% in 2024, followed by a slight recovery to 25.03% in 2025.

The company's profitability is also expected to take a hit, with the EBIT margin dropping to 14.85% in 2024. This is a significant decline from the 28.43% margin in 2021.

Here's a breakdown of Kering's projected income statement:

As you can see, Kering's revenue growth and profitability are expected to be volatile over the next few years. The company's net margin is expected to decline significantly in 2024, but recover slightly in 2025.

The company's free cash flow margin is expected to remain relatively stable, ranging from 8.14% to 9.97% over the next few years. This suggests that Kering will continue to generate significant cash from its operations, even if its revenue and profitability decline.

Overall, Kering's projected income statement suggests that the company is facing significant challenges in the coming years. However, the company's strong cash generation capabilities and relatively low debt levels suggest that it has the financial resources to weather the storm.

Yves Saint Laurent recorded a significant revenue decrease of -9% in 2024, both on a reported and like-for-like basis.

This decline is reflected in the brand's retail network sales, which fell -7%. Wholesale revenues, on the other hand, took a bigger hit, plummeting -25%.

Despite the overall decline, demand for Yves Saint Laurent's leather goods and refreshed classic handbags remained strong. However, wholesale revenues for these products specifically dropped -35%.

The brand's recurring operating income stood at €593 million, while its recurring operating margin was a respectable 20.6%. This margin was supported by investments in collections, stores, and clienteling initiatives.

Kering's earnings report has been a topic of interest in the fashion industry, and experts have weighed in on the company's performance.

Kering's flagship brand Gucci has been struggling, with a 25% decline in comparable sales. This is largely due to the fading appeal of the brand, as well as reduced tourist traffic in Europe and Japan.

Gucci's sales decline is a major contributor to Kering's overall underperformance, which has been ongoing for three years. The brand's strong pricing power and control over distribution are still positives, but its volatility makes it harder to predict future sales.

Analysts at Bernstein have noted that Gucci's sales decline was in line with expectations, while Saint Laurent's 10% decline was also in line with consensus. Bottega Veneta, on the other hand, showed a modest 1% growth, which was below expectations.

Despite the weakness in the top line, Kering's operating profit was 4% above expectations, thanks to an operating margin of 12.8%. This was driven by a strong performance from Saint Laurent, which reported a first half margin of 20.4%, 212 basis points above consensus.

The market's attention is now focused on Gucci's relaunch plan and management transition. Current market valuations already incorporate expectations of significant improvement, with Kering trading at 27 times expected earnings over the next 12 months.

Here are some key statistics from Kering's earnings report:

Kering remains committed to its long-term strategy of strengthening brand desirability and exclusivity while balancing creative innovation and heritage.

The company plans to achieve this through disciplined cost control, selective investments, and prudent balance sheet management. This approach will support the long-term expansion of its houses.

Kering Eyewear generated €1.6 billion in revenue in FY2024, with flagship brands Gucci, Maui Jim, Cartier, and Saint Laurent leading the performance.

Kering's EBITDA margin is expected to decline from 36.67% in 2021 to 27.32% in 2027.

The company's net margin is forecasted to increase from 18% in 2021 to 7.69% in 2027.

Kering's free cash flow (FCF) margin is expected to range from 8.14% in 2024 to 9.97% in 2027.

Here's a breakdown of Kering's estimated profitability metrics:

Kering's return on assets (ROA) is expected to increase from 10.75% in 2021 to 3.35% in 2027.

The company's return on equity (ROE) is forecasted to range from 25.24% in 2021 to 8.19% in 2027.

Kering's cash flow per share is expected to increase from 39.13 in 2021 to 29.4 in 2027.

The dividend per share is forecasted to range from 12 in 2021 to 5.53 in 2027.

Kering's book value per share is expected to increase from 107.6 in 2021 to 135.2 in 2027.

The earnings per share (EPS) is forecasted to range from 25.49 in 2021 to 10.42 in 2027.

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A cash flow forecast is a crucial tool for businesses to predict their future cash inflows and outflows.

It helps identify potential cash flow gaps and enables companies to make informed decisions about investments and financing.

A well-crafted cash flow forecast typically includes projected income statements, balance sheets, and cash flow statements.

Regularly reviewing and updating the forecast allows businesses to adjust to changes in the market and stay on track financially.

For example, according to the article, a company's cash flow forecast can be affected by changes in accounts receivable and payable.

Kering plans to enhance efficiency through disciplined cost control, selective investments, and prudent balance sheet management.

The company aims to support the long-term expansion of its houses while maintaining a focus on creative innovation and heritage.

Kering Eyewear generated total revenue of €1.6 billion in FY2024, with flagship brands Gucci, Maui Jim, Cartier, and Saint Laurent driving the performance.

The brand's recurring operating margin was 17.5%, slightly lower than in 2023 due to increased investments at Maui Jim.

Kering Eyewear continues to invest in Maui Jim and other key acquisitions, such as LINDBERG.

In Q4, revenues were up +8% reported and +7% on a comparable basis at €326 million.

The company expects margins for the full year 2025 to be lower than in 2024, but less than they were in the first half of the year.

Luca de Meo will join Kering as CEO in mid-September and will take over on 15 September.

The company is preparing for a new chapter under De Meo's leadership, with Deputy CEO Jean-Marc Duplaix stating that they will discuss the group's ambitions in 2026.

Kering's ratings are a crucial aspect of evaluating the company's performance. The company has received a super rating, which is a result of a weighted average of the rankings based on Global Valuation, EPS Revisions, and Visibility.

The super composite rating is the result of a weighted average of the rankings based on Fundamentals, Global Valuation, EPS Revisions, and Visibility. This rating is a comprehensive measure of the company's overall performance.

The composite rating is an average of the rankings based on Fundamentals, Valuation, Financial Estimates Revisions, Consensus, and Visibility. This rating requires the company to be covered by at least 4 of these 5 ratings.

The company must be covered by at least 2 of the 3 ratings for the calculation to be performed for the composite rating, which includes Capital Efficiency, Quality of Financial Reporting, and Financial Health.

Here is a summary of the different ratings:

These ratings provide a comprehensive view of Kering's performance and are an essential tool for investors and analysts.