Gucci sales plunge 25% in the second quarter as woes persist at luxury giant Kering

Kering reported worse-than-expected second-quarter results, with comparable sales down 15% year-on-year to 3.7 billion euros, missing analyst forecasts. Its flagship Gucci brand experienced a 25% sales plunge to 1.46 billion euros, reflecting broad weakness across all markets, particularly Asia Pacific and the U.S., amid ongoing geopolitical uncertainty and strained consumer spending. While CEO François-Henri Pinault acknowledged the disappointing performance, the company is focused on long-term growth and brand revival, with new CEO Luca de Meo facing the challenge of enhancing product desirability, especially for Gucci under its new artistic director, a factor analysts deem more critical than potential tariff threats.

Analysis

Kering's second-quarter performance significantly underperformed analyst expectations, signaling deep-seated issues beyond general market softness. Group comparable sales fell 15% year-on-year to €3.7 billion, missing the LSEG forecast of €3.96 billion, while the company's stock has already declined 8% year-to-date. The weakness is acutely concentrated in its flagship Gucci brand, which accounts for nearly half of group revenue and saw its sales plummet 25% to €1.46 billion. This underperformance was geographically broad, with notable weakness in the critical Asia Pacific and U.S. markets. While management points to laying "healthy foundations" and the appointment of auto industry veteran Luca de Meo as the new CEO from September 15th offers a potential catalyst for a turnaround, the challenges are substantial. Analysts emphasize that the core problem is a fundamental lack of product desirability and pricing power compared to peers like Hermès, a concern that outweighs external threats such as potential 15% U.S. tariffs. The timeline for a visible recovery appears extended, with the first glimpse of Gucci's new creative vision not due until September and a full collection rollout not expected until January 2026.

Key Decisions for Investors

• Given the severity of the Q2 sales miss and the 25% decline at the critical Gucci division, investors should anticipate continued share price pressure and negative sentiment in the short term.
• The investment thesis is now heavily dependent on a long-term turnaround story; therefore, closely monitor the strategic initiatives of incoming CEO Luca de Meo and the market reception to Gucci's new creative direction in September.
• Evaluate whether the potential for a brand revival under new leadership justifies the immediate risks of weakening consumer demand in key markets and the company's acknowledged struggles with product desirability, which will likely take several quarters to address.