What: Kering reports 14% decline in first-quarter group revenues as Gucci sales plummet 25%, while Bottega Veneta remains the sole bright spot with 7% growth.

Why it is important: The results demonstrate how luxury conglomerates must balance portfolio diversification with brand revitalisation, particularly as traditional growth engines face unprecedented market pressures.

Kering's first-quarter performance reveals significant challenges across its luxury portfolio, with group sales declining 14% amid weakening luxury demand. The most concerning development is at Gucci, where sales tumbled 25%, following an already difficult 2024 that saw a 21% decline, highlighting the brand's struggle to regain momentum in a challenging market. The group's portfolio shows marked contrasts in performance. Bottega Veneta emerged as the sole bright spot, achieving 7% growth driven by younger customers and VIP engagement. However, Saint Laurent experienced a 9% decline, while the Other Luxury houses division, including Balenciaga and Alexander McQueen, fell by 11%. In response to these challenges, Kering is implementing comprehensive cost-reduction measures, including store closures and organizational restructuring. While the company maintains stable performance in the US market, it faces uncertainty in China and acknowledges limited visibility on the impact of trade tensions and stimulus measures. The group's eyewear and beauty divisions show modest growth, offering some diversification benefits amid the broader downturn.

IADS Notes: Kering's first quarter 2025 results reflect the culmination of challenges that began emerging in 2024, when Gucci's sales declined by 21%. This downturn aligns with Bain & Company's November 2024 forecast of a 2% industry-wide decline, marking the luxury sector's most significant contraction since the Great Recession. While the US market remains stable, showing resilience amid Trump's trade tensions, the company faces particular challenges in China, where visibility remains limited. The divergent performance within Kering's portfolio is notable, with Bottega Veneta achieving 7% growth through strong appeal to younger customers and VIPs, while Saint Laurent declined 9% and other houses fell 11%. In response to these challenges, Kering has accelerated its cost optimization strategy, closing 25 stores in Q1 2025 and implementing significant organizational restructuring. This transformation, which includes the consolidation of corporate functions and elimination of regional duplications, aims to address the projected 500 basis point margin decline in the first half of 2025, though the impact of these measures may take time to materialize.

Kering sales fell 14% in Q1