In the third quarter of this year, the shares of luxury giant Kering jumped by 53% - this is the largest quarterly growth of its quotations, wrote Bloomberg. On October 10, the securities updated the annual maximum - at the moment the price exceeded €322.
The shares are now still worth 2.6 times their high of €792. But they are rising in value despite the fact that the company is going through bad times.
The company's revenue has been falling for the last two years, and the decline has been accelerating, from minus 2% in 2023 on a comparable basis to minus 12% in 2024.
Group revenue is also down this year, down 14% in the first quarter and 15% in the second quarter. Sales of Gucci, the most important brand in the Kering empire (almost 45% of the group's revenue for 2024), have fallen by a quarter for two consecutive quarters.
One reason for the current investor optimism is the arrival of new CEO Luca de Meo at Kering.
What problems will he have to solve?
Inoperative locomotive
Gucci is one of Kering's main locomotives, but lately it felt like it had gone down the wrong path.
In 2022, the brand's annual sales amounted to €10.5 billion, and in 2024 - only €7.65 billion. In the first half of 2025, its comparable sales through its own retail network decreased by 24%, revenue from wholesale sales collapsed by 42% in annual terms.
Gucci's revenue decline has lasted for eight consecutive quarters, Kering is expected to report another decline in its new financial statements on Oct. 22, Bloomberg writes.
One reason for the prolonged crisis, Reuters believes, is that Gucci did not get caught up in the trend. Brands since the pandemic have relied heavily on significant price increases to boost profits. However, as they grew, customers began to turn away from fashion houses - the luxury sector will lose around 50 million customers in 2024, according to Bain. The pressures of the economic crisis and "high price fatigue" have taken their toll.
And now, in order to attract customers' attention, fashion brands need to both stand out and "be more modest," said Stephane Galieni, partner at creative agency Balistik Art. In other words, customers are demanding more sustainable and practical clothing.
But for Gucci it became a "task with an asterisk" - the bright style of models from designer Alessandro Michele stopped liking customers, Michele left the brand in 2022. His successor Sabato De Sarno proposed a more minimalist style, the same "quiet luxury", but it could not revive sales, writes Reuters.
To build revenues, Kering bought a 30% stake in fashion house Valentino in 2023, with the option to buy it all. But that pushed up corporate debt in 2024 by almost a quarter compared to 2023, to €10.5 billion euros. In September this year, Kering postponed the buyout of Valentino until at least 2028 due to its high debt load. At the time, the fashion giant's net debt was more than three times the company's projected 2025 earnings before interest, taxes and depreciation.
Kering tried to solve the problem with falling sales not only through the purchase of Valentino. Since September 2023, Gucci has changed four CEOs, as well as three designers, Bloomberg wrote.
In September this year Luca de Meo appointed Francesca Bellettini, a top manager of Kering, as the new head of Gucci; a few months earlier the brand had a new creative director - Demna Gvasalia.
Demna's the savior?
Demna Gvasalia, or simply Demna as he asks to be called, is a native of Georgia and a Master of the Royal Academy of Fine Arts in Antwerp. Before becoming Balenciaga's creative director in 2015, he worked as a senior designer at Maison Margiela and Louis Vuitton and created the Vetements brand.
It was under Demna that Balenciaga's sales began to grow intensively, for example, in 2017 they added 40%, Kering named Balenciaga the fastest growing of all the group's brands in the second half of that year.
Demna proposed to produce expensive, provocative, yet ordinary things, like a $2000 leather replica of an Ikea bag or a black "trash" bag made of fine leather. He pioneered the "ugly shoe" trend with his hit Triple S sneakers. All of these extravagant ideas proved commercially successful and earned the designer fame as a revolutionary, while Balenciaga helped to increase sales and attract a younger audience.
That's exactly what Gucci needs right now.
At the end of September, on the eve of the show of Demna's first collection, Gucci removed all materials from its Instagram account, and instead published an album La Famiglia with 37 portraits of models wearing clothes from the new collection, although usually photos of new outfits try to keep secret before the show. Most of the images are inspired by the fashion house's archives. However, this was probably the fastest way to prepare the collection in a short period of time.
The next day Demna organized the premiere of the short film "Tiger", directed by Spike Jones and Halina Rein, at the Milan Stock Exchange building. Starring Demi Moore, it also stars Edward Norton, Ed Harris and others.
After the premiere, Gucci was once again the talk of the press. "It's all at once funny, tender, frightening, excessive, surreal, realistic and ironic - and very Demna-like," Harper Bazaar wrote of "Tiger".
After the premiere, the brand launched sales of the new collection in 10 flagship stores, they will be available until October 12. This is atypical for the fashion world, usually there is a time gap between the show and the sale of new pieces, and the collection sells out during the season.
HSBC analysts interpret Demna's new approach as "whatever your age, Paul, style, financial capability, aspirations, come back, we have something for you." "Moving from a niche market to a broad market that spans all segments and price points is an important step towards restoring growth after such a sharp downturn," the bank said in a note.
HSBC does not believe in the idea that "Demna is the savior of Gucci", but believes that his initiatives should be a great incentive for consumers to return to Gucci stores: "Will they buy Demna models? It's not really the most important question... What matters most is the ability to get customers into the stores, and then it's up to the salespeople to turn visitors into customers".
After the Milan show, traffic at Gucci stores in the United States reached its highest level in three weeks, Reuters writes, citing data from Placer.ai.
The designer plans to show a full runway collection in February 2026.
Tasks for the new CEO
A week before Luca de Meo joined Kering, Bloomberg wrote that the new CEO has "the toughest job in the luxury industry". He needs to cut debt, optimize a bloated management team and get Gucci running at full capacity again. "Even for an automaker it would be challenging, but there you can just cut costs. It's different in the luxury industry - here, success depends on the creative vision of designers and generous marketing investment to stand out in a crowded market," the agency wrote.
Luca de Meo succeeds François-Henri Pinault, who has led the fashion giant for the past 20 years and whose family controls Kering. Pinault's reign has seen periods of both prosperity and decline. But in recent years, "it's become like a textbook case of how not to run a company," Flavio Sereda, a luxury-brand portfolio manager at GAM UK Ltd. told Bloomberg.
A new strategic development plan for Kering de Meo is due to be presented in the spring, Bloomberg writes.
HSBC analysts believe he has received a mandate from shareholders to make all the necessary changes and the Pinault family will adapt to the new chief executive's decisions.
The documentary Anatomy of a Comeback, which tells the story of how de Meo transformed Renault, could provide insight into how Kering's corporate culture will change, the bank's analysts wrote.
Most likely, in their opinion, it will be similar to what happened at Tiffany: the plan is to retain some key employees, bring back professionals who were sorry to lose, and attract the best from the luxury and related industries. The bank expects "significant" personnel changes at Kering over the next year and to bring in outside talent. This is indicated by the fact that Thomas Kunz, a recruitment specialist, has joined Kering from Renault. He will become Head of Global Talent Development, a new position at Kering.
UBS and Kepler Cheuvreux believe that already at the end of the third quarter Kering will show that the decline in comparable sales has slowed down. For example, Kepler believes that the decline in annualized terms will be 9% against 15% in the second. In early October, analysts at the financial firm reiterated a "buy" recommendation for Kering securities and raised their target price from €280 to €320 per share. This roughly corresponds to the current quotations.
UBS expects Kering's quarterly revenue to decline by 9% (currency adjusted) to €3.28 billion. Gucci will account for most of the decline - minus 15%, although here too the dynamics are consistently improving. Bottega Veneta, according to UBS forecast, will be the only Kering brand whose sales will grow - by 1% (adjusted for currency fluctuations). The bank raised its forecast for Kering's EPS growth by 18% for 2025 to €5.93, and improved it for the next two years.
As for Kering's main brand, the reality is that Gucci needs to "become a bit like Louis Vuitton," HSBC analysts wrote - that is, become a brand for everyone and be present in all luxury segments. Gucci needs to clean up its pricing policy (its products have been overpriced and over-publicized for several years, the bank's analysts wrote).
At the same time, costs have to be controlled, and therefore you should not count on large capital investments in stores. HSBC expects Gucci sales to start growing from the second quarter of 2026. According to the bank, including due to this, Kering's debt level will also improve next year. The bank raised its target price for Kering from €300 to €335 at the end of September, which implied growth of almost 22% at that time.
Now the average target price from 22 analysts is €252, which is lower than the current values (on October 10 the securities closed at €309). The majority of recommendations are "hold". Obviously, the market has taken a wait-and-see attitude and wants to understand what the company's next steps will be.
The maximum target of €370 for Kering shares is given by Morgan Stanley analyst Edouard Aubin (in October, he raised the target price immediately from €250 and the rating for the securities from neutral to "above market").
His memo states that "the pendulum of the fashion industry seems to have swung toward more colorful, expressive and maximalist imagery, moving away from minimalism," and Kering could be one of the main beneficiaries of this "surge of creativity and novelty."
This article was AI-translated and verified by a human editor
