Overview
Kering said fourth-quarter sales reached 3.9 billion euros, down 3% from the same period a year earlier on a currency-adjusted basis. That decline was smaller than the consensus forecast of a 5% fall compiled by Visible Alpha. The results cover the first quarter under CEO Luca de Meo, who took the helm with a mandate to stabilise the luxury group and improve profitability.
Brand performance and Gucci trends
Gucci, Kering’s largest profit contributor, recorded a 10% revenue drop in the quarter, slightly better than analyst expectations for a 12% decline. The company noted this marked the brand’s 10th consecutive quarter of falling sales. Finance Chief Armelle Poulou said journalists were told that Gucci registered some improvement at the end of the year across "almost all regions," a development she attributed in part to recently launched products and handbag sales.
The report reiterated the persistent demand weakness Kering has faced since the maximalist designs of former Gucci designer Alessandro Michele lost favour in 2022. That shift in consumer preference has placed pressure on the group’s profitability and attracted scrutiny from investors over leverage and earnings performance.
Profitability, cash flow and leverage
Kering disclosed that free cash from operations fell by 35% last year when stripping out one-off proceeds from real-estate disposals, arriving at 2.3 billion euros. Annual operating income was reported at 1.63 billion euros, which the company described as less than a third of its 2022 level.
Margins have narrowed markedly: group operating profit margin declined to 11% while Gucci’s margin stood at 16%. These figures compare with margins of 28% for the group and 36% for Gucci three years earlier. For context in the luxury sector, the company reported that its peer delivered a 22% margin last year overall, and a 35% margin in the leather and fashion division.
Balance sheet actions and strategic moves
Since his appointment, de Meo has pursued a series of balance-sheet and structural actions. In October, Kering sold its beauty business and certain brand licences to L’Oréal for 4 billion euros, a transaction that generated cash and established royalty revenue streams while removing a possible future avenue for growth.
The group has also been trimming its retail footprint. Poulou said the company reduced its store network by 75 boutiques last year and plans additional closures. Net debt was reduced to 8 billion euros, accompanied by roughly 5 billion euros of long-term lease liabilities.
De Meo’s compensation package was noted as among the largest in corporate France, potentially exceeding 20 million euros per year. He is scheduled to take questions from analysts at 0700 GMT and is expected to set out a refreshed strategy at an investor day planned for April.
Market reaction and commentary
The stock market has shown a positive response to de Meo’s arrival; Kering’s shares have risen by about 50% since the announcement of his appointment in June. However, executives and analysts emphasise that lifting top-line growth remains the core challenge.
JPMorgan analyst Chiara Battistini said investors are broadly supportive of de Meo’s efforts to clean up the balance sheet, but noted that restoring financial strength ultimately depends on selling more product. In an internal memo circulated last autumn, de Meo highlighted that Gucci’s sell-through for leather goods - the proportion of items sold at full price - lagged far behind rivals, and he likened an unsustainable production-to-sales ratio by saying, "No industrial company can survive producing 3 to sell 1!"
Outlook and structural challenge
The company faces a demanding recovery path: sales improvements will need to be sustained across regions and product categories, margins must be rebuilt from lower bases, and the group must reconcile shorter-term cash objectives with longer-term brand strategy. While the immediate focus has been on reducing leverage and simplifying governance, management has signalled further strategic moves will be disclosed at the investor day.
For now, Kering’s fourth-quarter results underline both the progress made on the balance sheet and the depth of the operational work still required to restore the group to its earlier levels of profitability.