LONDON — It was a difficult quarter, with double-digit revenue declines across all its major brands, an in key regions corresponding to Europe and North America, but Kering is undaunted, and planning for higher days ahead.

Within the third quarter, Kering saw group revenue fall 13 percent at reported exchange rates and 9 percent on an underlying basis to 4.46 billion euros. The numbers were broadly consistent with analysts’ expectations, and got here amid a wider luxury slowdown and geopolitical upset.

Sales at Gucci, Kering’s largest brand, which generates greater than 50 percent of group revenue, fell 14 percent on a reported basis and seven percent underlying to 2.22 billion euros. 

At Yves Saint Laurent, a brand that’s roughly one-third of Gucci’s size, sales were down 16 percent on a reported basis, and 12 percent underlying. At Bottega Veneta, they fell 13 percent at current exchange, and seven percent underlying. 

Kering’s “other houses” division, home to brands including Balenciaga and Alexander McQueen, saw sales fall 19 percent on a reported basis and 15 percent underlying.

Kering said Alexander McQueen experienced a “slowdown” within the quarter, while Balenciaga’s growth was “mixed” across the regions. The corporate doesn’t break out revenue figures for those brands.

Kering said the negative revenue trends were magnified by lower wholesale activity at each houses, a part of a wider technique to downsize the channel. 

Kering’s declines compared with a 9 percent like-for-like uptick in the style and leather goods division at rival LVMH Moët Hennessy Louis Vuitton, which posted sales of 9.75 billion euros within the third quarter. 

Earlier within the day, one other competitor, Hermès, saw sales rise 16 percent at constant exchange within the third quarter whilst the market loses its appetite for luxury. 

A few of the pain was self-inflicted, in accordance with François-Henri Pinault, Kering’s chairman and chief executive officer. He said the “change” in third-quarter revenue performance partly reflected the “impact of our decisions to further elevate our brands and their distribution.” 

Like so many other luxury names, Kering has been shifting away from the wholesale channel and putting a greater emphasis by itself retail distribution, a grueling process that always leads to short-term losses.

As well as, Kering has also made seismic changes on the management, creative, M&A, and sweetness fronts because it attempts to upgrade its strategies and brand appeal. Pinault said the recent changes will enable Kering to reclaim its “position and influence,” out there and achieve growth despite macro-economic headwinds.

Wholesale, which represents around 22 percent of business, was down 20 percent within the third quarter, while retail fell 6 percent. The largest declines were in North America, which was down 21 percent, and Europe, which fell 10 percent within the three months.

In contrast, sales in Japan were up 28 percent, thanks partly to the traveling Chinese consumer and to favorable exchange rates. Revenue within the Asia-Pacific region rose 1 percent, also because of the Chinese who’re hungry to spend while on holiday.

On Tuesday’s analyst call, Jean-Marc Duplaix, Kering’s deputy CEO in control of operations and finance, talked in regards to the current cold climate for luxury.

He said that geopolitical risks were mounting, and that would deter already nervous consumers. With regard to China, Duplaix said 25 percent of demand is from tourists shopping in places like Korea and Europe.

In mainland China, the mood isn’t as buoyant. “Consumer sentiment just isn’t where we were expecting it to be at the start of 2023,” Duplaix said.

Sales trends are flat in North America, with persistent weak traffic and “no inflection point” in sight, said Claire Roblet, Kering’s financial communications director. 

Much of the decision was in regards to the path ahead, especially for Gucci, which over the past yr has seen the arrival of Sabato De Sarno as creative director, and of Jean-François Palus as interim president and CEO of the brand. 

Duplaix described Palus as an “operational manager” whose job is to repair short-term issues, make the corporate more cost-efficient, and set “a latest foundation for Gucci.”

The brand is planning to ramp up its marketing, with more special and seasonal campaigns, corresponding to the one starring rumored loved-up couple Kendall Jenner and Bad Bunny, and international brand exhibitions corresponding to Gucci Cosmos, which can travel to Japan in 2024. 

In response to a matter, Duplaix added that Kering was in no hurry to interchange Palus. “The seek for a latest CEO just isn’t a priority. Execution is the priority, and we’ll take the time we’d like to seek out his successor,” he said. 

There’ll, nevertheless, be a string of latest hires, with Palus seeking to beef up Gucci management “and add latest skills and competencies” to the team, in accordance with Duplaix.

He added that Gucci showed “good resilience” in handbags and travel categories within the three months, with management aiming to enhance the “exclusivity and quality” of Gucci merchandise. 

The main target will proceed to be on the classics, as 70 percent of the seasonal merchandise is evergreen product purchased by a loyal clientele, Duplaix added.

Looking ahead, Kering also plans to maintain cool on the M&A front after a rush of acquisitions in the primary nine months.

Over the summer Kering snatched up Creed for a reported $3.8 billion and followed up the deal a couple of weeks later, agreeing to purchase 30 percent of Valentino for 1.7 billion euros. It has an choice to take full control of the Italian brand by 2028. 

As reported, Kering has been under pressure from activist investors to make a transformational acquisition that may put it on a more equal footing with rival LVMH and make it less reliant on Gucci, which accounted for 67 percent of the group’s operating profit in 2022.

Duplaix suggested that Kering would take a break from buying, and focus as a substitute on “portfolio, strategy and integrating the brand new brands. We’ve got a really full portfolio without delay, and there may be a lot opportunity with these iconic brands,” he said. 

Duplaix argued that Creed would help to supercharge Kering Beauté. Duplaix described the brand new division as a beauty “start-up” with a small top line — and a number of costs. 

“Creed will help it to speed up, and can absorb a few of those costs. It’s a 300 million euros business and highly profitable,” he said, urging analysts to exercise patience. “This division might be loss-making until we reach a critical scale.”

Kering also has big plans for Balenciaga nearly a yr after an promoting scandal rocked the brand and dented sales within the U.S., the U.K. and continental Europe.

Last November, two Balenciaga campaigns triggered outrage that engulfed the French fashion house, photographers, creatives and even longtime collaborator Kim Kardashian.

One featured children posing alongside quite a lot of items, including logo beer glasses and purses shaped like teddy bears wearing bondage gear.

A separate fashion campaign, depicting actresses Nicole Kidman and Isabelle Huppert in business attire, included a closeup of a handbag resting on a page from the 2008 Supreme Court ruling “United States v. Williams,” which confirmed the promotion of kid pornography as illegal and never protected by freedom of speech.

The group and brand have since apologized, and have kept a low profile over the past yr. But that’s all about to alter.

“The brand is coming back in 2024,” Duplaix said, adding that Balenciaga sales have been “booming” in Asia, which was less impacted by the controversy. 

“Brand appreciation is currently very high, very strong and we’ll resume our communication initiatives next yr. We haven’t been pushing a lot on the open-to-buy this yr, but we’re planning for a rebound depending on market conditions,” he said.

Within the hard luxury division, Kering said Boucheron’s positive performance reflected the success of its high jewelry and mainline collections. Pomellato achieved solid growth in its stores, while Qeelin showed “excellent” momentum.

Duplaix said jewelry performed well within the period attributable to investment and since “the brands are less exposed to the U.S. market.”  

Revenue at Kering Eyewear totaled 331 million euros, up 34 percent on a reported basis attributable to the contribution of sunglasses brand Maui Jim. The division rose 2 percent on a comparable basis. Growth was driven mainly by sales of optical frames following “very strong” sales of sunglasses in the primary half of the yr, Kering said.

Over the past few weeks, analysts had already dialed down their expectations for Kering’s third quarter, while some downgraded their price targets for the brand.

As reported, Bernstein’s Luca Solca downgraded Kering shares to a “market perform” rating from “outperform,” based on De Sarno’s Gucci debut in Milan; the recent M&A activity; and the flurry of management and artistic changes on the French group.

Solca reduced Kering’s share price goal to 492 euros from 582 euros, declaring there was “no big bang” in Milan. In brief, Bernstein’s team didn’t see enough on Gucci’s spring 2024 catwalk to signal a “fast and material Gucci reacceleration.”

Barclays also slashed its price goal for Kering’s shares to 510 euros from 542 euros. Like Bernstein, the bank is skeptical in regards to the group’s ability to make meaningful changes on the brands.

“We remain cautious on Kering’s turnaround story because it stays to be seen whether key brand Gucci will have the opportunity to successfully relaunch momentum through its latest aesthetic,” wrote Carole Madjo, who also nodded to challenges with Saint Laurent and Bottega Veneta. 

She argued that Balenciaga “has not yet recovered from the negative impact its controversial marketing campaign had within the U.S.”

Madjo added the bank is waiting “to realize more visibility on the assorted brands’ outlooks amid a worrying macro environment.”

In contrast, TD Cowen is upbeat about Kering’s future.

“We expect the long-term stays vivid, but each economic and geopolitical bumps will drive volatility in the following few quarters,” the bank said last week. “We remain excited in regards to the innovation and product changes ahead at Gucci and Kering’s overall agility.”

Kering released its results after the market close in Paris. Shares closed up 1 percent at 407.45 euros.