Kering Pledges Return to Growth Despite Sweeping Store Closures

PARIS — Kering reported a third year of declining sales, dragged down by performance at its flagship label Gucci as the brand prepares to unveil new designer Demna’s creative vision at Milan fashion week later this month.

Yet the company struck a positive tone for the upcoming year, forecasting growth for its brands despite plans to close 100 stores, mostly in Gucci’s network in Asia.

“We’ve seen signs of rebound for nearly all our brands — this allows us to kick off 2026 with a certain amount of optimism,” new chief executive Luca de Meo told journalists at his first earnings presentation as CEO of the group. The executive also projected margin expansion for the coming year.

Fourth-quarter sales fell 3 percent on a comparable basis, with Gucci down 10 percent — an improvement compared to the brand’s 22 percent drop in the first nine months of the year. Group sales came in slightly ahead of analyst expectations.

De Meo said the crisis at Kering called for a deep rethinking of all parts of the business. “We can question everything from scratch,” he told analysts in his first earnings presentation as CEO.

A sweeping effort to right-size the group’s retail network already resulted in the closure of 75 boutiques last year.

De Meo is also reviewing manufacturing and logistics, looking for group-level synergies for back office activities and exploring bringing in executive talent from other industries in a bid to make the company leaner and more agile and more innovative.

De Meo built his reputation as a turnaround whiz in the automotive industry, streamlining product lines at French carmaker Renault and boosting the global appeal of Italian brand Fiat. Since taking the reins at Kering in September, the executive has moved quickly to tackle some of the group’s biggest challenges. He addressed the company’s heavy debt load by pushing out a deal to acquire Valentino and selling its nascent beauty division to L’Oréal for $4.7 billion.

Kering said it will pay an exceptional dividend of €1 per share after the closure of the beauty deal, expected in the first half of the year. Shares jumped as much as 14 percent in early trading, lifting other luxury firms including Hermès and Burberry.

Reviving Gucci remains the main order of business. The brand’s operating profits, which account for more than half the group’s income, tumbled 40 percent last year. Its sales have nearly halved since their 2022 peak.

“Great brands are immortal,” De Meo told analysts, noting that the Italian label had shown its ability to rebound in the past.

He said the group would move quickly to fill stores with new styles from Demna, following his debut runway show on February 27.

Analysts said on Tuesday they continue to await real signs of progress.

“Both investors and consumers have, in effect, yet to see the new Gucci, let alone fully assess a turnaround,” said Bernstein analyst Luca Solca, in a note.

Meanwhile, megabrand rivals like Dior and Chanel have sped ahead with rolling out new designs from new creative directors.

De Meo will detail his strategy at a capital markets day in Florence on April 16.

Hinting at a range of potential areas of focus, the executive highlighted plans to enter the wellness and longevity space and cited custom-made and high jewellery as “a very big hanging fruit” for fashion brands like Gucci as the group seeks to shield itself from the fluctuations of the fashion business.

Saint Laurent reported flat sales in the holiday quarter while Bottega Veneta eked out 3 percent comparable sales growth. The group’s Other Houses division turned positive, with retail sales rising 6 percent at Balenciaga as the label returned to growth, while jewellery brands Boucheron and Pomellato continued “dynamic expansion.”

The update from Kering comes as the fashion industry continues to struggle to win back shoppers, with LVMH chairman Bernard Arnault warning that trading conditions are likely to remain choppy this year. Weak appetite for luxury in China and volatility in the US have complicated efforts by fashion brands to rekindle sales after pushing prices too high during the post-pandemic boom.

While Kering’s presentation Tuesday contained “clear positives,” analysts at Barclays said the group needed to more clearly outline its turnaround strategy.

Learn more:

Kering Must Downsize, Reduce Gucci Exposure and Chase Synergies, CEO de Meo Says in Memo

Luca de Meo calls for store closures, recalibrated pricing and a push to grow brands beyond Gucci as the group works to return to sustainable.