Yahoo Finance Kering's Half-Year Results Are Bleak
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Kering is sounding the alarm: The luxury fashion conglomerate announced its net profit halved in the first six months of 2024, to €878 million — which is worse than the 40 to 45% profit plunge it forecasted in April.
"In a challenging market environment, which adds pressure on our top line and profitability, we are working assiduously to create the conditions for a return to growth," CEO and Chairman François-Henri Pinault said, in a statement. "Our Houses pursue their investments to enrich their offer, intensify the impact of their communications, and reinforce the exclusivity of their distribution. We make certain that every one of these investments creates value for the long term. While the current context might impact the pace of our execution, our determination and confidence are stronger than ever."
In its first-half results for 2024, the Gucci, Bottega Veneta and Saint Laurent owner reported that group revenue was down 11%, to €9.0 billion. Net profit was down a whopping 50%. (Kering warned investors it would likely be down 40 to 45% earlier this spring.)
In the second quarter, revenue totaled €4.5 billion (down 11%); executives highlighted a negative currency effect of 1% and a positive scope effect of 1% from the consolidation of Creed as factors, as well as a decline in store traffic within its directly-operated retail network and in wholesale revenue (due to a shift in strategy to make the distribution of its brands' products more exclusive).
Kering doesn't break down the individual earnings of all of its brands, but of the ones it does, Gucci was the loss-leader: First-half revenue was down 20%, at €4.1 billion. (In the second quarter of 2024, sales dropped 19%.) The Italian fashion house has had major shifts in recent years, but this period encompasses Sabato de Sarno's retail debut. Saint Laurent, meanwhile, dropped 9%, to €1.4 billion (wholesale took the biggest hit, falling 25%). Bottega Veneta was the bright spot of the report, achieving a "record first half" with revenue at €836 million.
Kering isn't alone in its losses, though its earnings paint arguably the bleakest picture of luxury fashion's slowdown. LVMH recently reported slipping sales in the first half of 2024 too (albeit, not a 50% drop in profit).
Executives don't expect to see improvement by the end of the year. On the webcast revealing these results, Jean-Marc Duplaix, Kering's deputy chief executive officer at the helm of operations and finance, said: "In this very volatile environment, it's very difficult to predict what will happen in August and September, so I won't predict anything when it comes to the trends for the rest of the quarter."
In the report itself, the company predicted its recurring operating income in the second half "could be down by approximately 30% compared to the second half of 2023."
