Gucci's sales exceeded expectations. Kering's stock soared 20%.

Sales at the Gucci fashion house in the second quarter declined less sharply than analysts had feared. These are the first results of Kering’s efforts to revive its largest brand, Bloomberg notes. The company’s American Depositary Receipts surged 20% on the over-the-counter market following the release of the earnings report.

Gucci’s second-quarter revenue totaled €1.41 billion ($1.6 billion), with comparable sales down 2%, the Kering Group reported on July 28. Analysts had expected sales to fall by 3.27%, according to Bloomberg. Compared with the previous three months, the brand’s performance improved across all regions, most notably in North America, according to the group’s statement. In the previous quarter, Gucci’s revenue fell by 8% due to the war in the Middle East. Kering CFO Armelle Poulu told reporters that sales of Gucci leather goods returned to growth during the quarter, according to Bloomberg.

Revenue for the entire Kering Group, which also includes the Yves Saint Laurent and Balenciaga brands, totaled €3.65 billion ($4.16 billion) in the second quarter, up 2% on a comparable basis. Adjusted operating profit was €921 million, compared with €920 million a year earlier. The company notes that the global geopolitical situation is creating challenges for business. The conflict in the Middle East reduced Kering’s revenue growth by 1 percentage point in the second quarter. Typically, this region accounts for about 5% of the group’s retail revenue, according to Bloomberg.

However, Kering sees “early signs of improvement in brand appeal, commercial momentum, and operating metrics” across all of the group’s divisions, Kering CEO Luca de Meo emphasized during a conference call following the release of the financial results. He also stated that he expects the group’s revenue to grow this year, but cautioned that the growth would not be linear and that third-quarter results might remain “roughly at the same level.” In November, de Meo plans to visit China, where, he said, he sees significant potential.

“These results confirm Gucci’s continued progress,” wrote RBC analysts Piral Dadhania and Richard Chamberlain in a note cited by Bloomberg. “However, achieving Kering’s goals in the second half of the year will require a significant turnaround for the better.”

Kering shares rose 3.2% to €250.5 during trading in Paris ahead of the earnings release. Year-to-date, they are down 16.8%. Following the earnings release, Kering’s American Depositary Receipts (ADRs) jumped 20.6% in over-the-counter trading to $32.7. Year-to-date, they have fallen 9%.

The Kering Group, controlled by billionaire François Pinault and his family, has lagged behind its competitors in recent years because Gucci’s products have failed to make the desired impression on affluent shoppers, according to Bloomberg. After taking office in September, CEO Luca de Meo reshuffled the management team and sharply reduced the debt burden by selling Kering’s cosmetics division to L’Oréal, including the fragrance brand Creed. The former Renault CEO also closed underperforming stores and cut staff. Over the past year, the total number of employees has decreased by nearly 9%, and in the first half of the year, the retail network was reduced by 84 stores.

Nevertheless, the group's recovery is impossible without Gucci returning to growth, and the long-awaited turnaround is still proceeding slowly, Bloomberg notes.

Last year, Gucci appointed Demna Gvasalia as creative director; he had previously worked at Balenciaga for ten years. In February, the designer presented his first runway collection for Gucci in Milan—featuring “sensual looks reminiscent of the Tom Ford era” at the fashion house, according to Bloomberg. In May, the brand also held a cruise collection show in New York.

This article was AI-translated and verified by a human editor