Kering, the French luxury group behind brands like Gucci, Yves Saint Laurent, and Bottega Veneta, reported a decline in fourth-quarter sales, though shares jumped on Tuesday as investors reacted positively to signals of a potential turnaround. The company anticipates a return to growth in 2026, despite a challenging 2025 marked by a 10% overall sales decrease to €14.7 billion.
Fourth-quarter sales fell 3% on a comparable basis to €3.9 billion ($4.64 billion), a slight beat compared to analyst estimates. However, Gucci, Kering’s largest revenue driver, continued to struggle, posting a 10% decline in comparable sales for the quarter. Other houses within the Kering portfolio demonstrated flat or moderate growth.
“2025 was not the year we wanted,” CEO Luca de Meo stated on an earnings call. “It didn’t reflect the full potential of Kering, and we all know it.” Recurring operating income decreased by 33% year-over-year, and the operating margin declined to 11.1% due to weaker sales. Despite these figures, Kering shares rose as much as 14%, closing up 10.3%, though they remain down nearly 14% year-to-date.
The positive sentiment extended to the broader luxury sector, with Burberry gaining 3.4%, Hermes rising 3%, and Brunello Cucinelli adding 2.7% in early trade. LVMH shares saw a 1.4% increase, while Richemont gained 2%.
Navigating a Post-Boom Landscape
Kering, like its competitor LVMH, has faced headwinds following a surge in demand during the Covid-19 pandemic. The subsequent price increases alienated some customers, and coupled with weakening demand from China – previously a key growth market – and strategic missteps, the company’s performance has suffered. The appointment of Demna as artistic director of Gucci is intended to revitalize the brand and restore its reputation. His first collection, “La Famiglia,” launched last year.
The market is closely watching to see if De Meo, who joined Kering last year as the company’s first outsider CEO, can successfully steer a turnaround. De Meo previously revitalized the automotive manufacturer Renault.
Bernstein analyst Luca Solca noted that the results “point to a slight improvement, all across the board of the Kering brand portfolio and activities.” He added, “Whether this could be a precursor for an inflection, moving brands like Gucci to growth in FY26E as consensus currently anticipates, will be the key investment case debate.”
Kering anticipates a “return to growth and margin improvement” in 2026, but provided limited details regarding its outlook. The company plans to present a more comprehensive long-term plan at its Capital Markets Day in April.
De Meo emphasized that the company has been “taking action decisively to put the group back on the right trajectory” since the second half of the year, while acknowledging that Kering remains “far from” its desired position.
One key initiative has been deleveraging the balance sheet, which led to the sale of its beauty segment to L’Oréal for €4 billion. This move aims to reduce Kering’s net debt and allow the company to focus on its core fashion businesses.
“Our objective is clear, reignite desirability and prepare the next cycle of growth, house by house, product by product, client by client,” De Meo said.
Kering is also exploring expansion into the wellness and longevity segments, stating that it sees potential for value and growth in this area. Further details regarding the company’s jewelry strategy will be unveiled in April.
Jefferies analyst James Grzinic highlighted that Kering’s closing stages of 2025 “confirm gradually reducing pressures at a time of more supportive industry conditions.” He added that investors will be looking for further insights from De Meo, particularly regarding “considerable cost savings potential,” which he identified as an inevitable area of focus.
