'Harsh reality': Gucci sales fall by a quarter, continuing the crisis at Kering

French holding company Kering reported a sharp drop in sales of its flagship brand Gucci - by 25% in the second quarter. Kering's total revenue fell by 15%. In addition to weak demand for luxury goods, the market is also worried about the growing debt load: it is now more than four times higher than the level of 2022. The lost attractiveness of the legendary Gucci and Saint Laurent brands is now the main problem for Kering, overshadowing even the trade war, analysts say.

Revenue at Gucci, a key brand of French holding company Kering that accounts for nearly half of the group's sales, fell 25 percent year-on-year in the second quarter of 2025, to €1.46 billion, according to a July 29 published report by Kering. Wall Street analysts had forecast €1.47 billion, передает The Wall Street Journal.

Gucci is one of the brands hardest hit by the downturn in luxury demand: it has caused instability both within it and at Kering as a whole, noted Bloomberg. At the same time, Gucci is undergoing its second design rethink in three years. At the end of 2022, the company left Alessandro Michele, a designer under whom sales nearly tripled between 2015 and 2019, but whose eccentric ideas eventually alienated customers. His successor Sabato De Sarno lasted only two years, and new creative director Demna Gvasalia, who previously headed Balenciaga, has yet to unveil his first collection.

Kering's total revenue fell 15% year-on-year to €3.7 billion, while analysts had forecast €3.96 billion, notes CNBC, citing LSEG data. The French holding company, which also owns the Saint Laurent and Bottega Veneta brands, reported lower sales in all regions, especially Japan and Asia-Pacific.

Kering Chairman and CEO Francois-Henri Pinault acknowledged that the results left much to be desired, but emphasized that the company continues to work systematically to overcome the crisis. "Yes, the current performance is far from our real potential, but we are confident that the ambitious efforts of the past two years have created a solid foundation for the next phase of Kering's development," Pinault said in a statement accompanying the report.

"Kering faces a harsh reality: two key markets - China and the U.S. - are under pressure," Third Bridge analyst Yanmei Tan told CNBC in a statement following the release of the statements.

The French holding company is under pressure from investors to restore growth after two years of falling sales and cut debt, reports Reuters. By mid-year, Kering's net debt had shrunk to 9.5 billion euros from 10.5 billion at the end of 2023 - mainly due to real estate sales. Still, the company's current debt load is more than four times its 2022 level, Reuters adds. At the same time, Kering continues to overhaul its retail structure and plans to close up to 80 net stores by the end of 2025.

"Kering's increasing debt load has raised concerns among investors," noted HSBC analysts in a Financial Times statement ahead of Tuesday's report. They said this was due to a string of mergers and acquisitions, as well as real estate transactions involving Kering boutiques. What makes the situation particularly worrisome is the 50% drop in earnings before interest and taxes last year. Experts predict that the pressure on this figure will continue into 2025.

After losing about 60% of its market capitalization over the past two years, Kering last month announced the appointment of former Renault chief Luca de Meo as CEO - he will take over in September. He will be tasked with a deep restructuring of the holding company amid a slump in the luxury segment, caused in part by weaker demand in China and inflationary pressures in other key markets. As Bernstein analyst Luca Solca emphasizes, de Meo will not only have to improve Kering's operating performance, but also deal with its growing debt load and overhaul the company's management model.

In addition, the recently agreed 15% and 20% duties on exports from the EU to the US, a market that accounts for more than 20% of Kering's revenue, pose new challenges for the company. According to CFO Armelle Pulu, the company expects to offset the effects through price adjustments, some of which have already been implemented. "A second wave [of price increases] in the fall is possible," she said, stressing that Kering acts in a measured way, focusing on consumer sentiment. Meanwhile, analysts warned that after a series of sharp price increases, many luxury players have little room left to further increase product costs for profit. 

The key challenge for Kering is not so much to overcome trade risks as to restore the image and appeal of the brands, especially Gucci under new creative director Demna Gvasalia, according to Wall Street. "For Kering, the problem is not primarily the duties, but the desirability of the product," said Third Bridge analyst Yanmei Tan. - Brands like Hermès can raise prices without losing demand, but Saint Laurent and Gucci don't have that kind of market power yet."

For her part, Carol Maggio of Barclays added: "Bringing something fresh and unexpected is what I believe can make Gucci great again."

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