Kering and Gucci: Stabilization after a difficult period?

French luxury group Kering $KER.PAwhose flagship brand is Gucci, has faced a challenging period in recent years. Weakened demand for luxury goods, particularly in China, and the unconvincing direction of the Gucci brand have led to a 38% decline in the stock over the past 12 months. Yet recent results and strategic moves suggest a possible stabilisation.

Better than expected results

-Shares of $KER.PA rose 6.7% as annual earnings slightly beat expectations.

- However, operating income fell 46% to €2.55 billion, the worst result since 2016.

Gucci still in trouble, but first signs of improvement

- Sales down 24%, yet demand in China improved year-on-year.

- Designer Sabato De Sarno is leaving after just two years - his minimalist collections didn't appeal to a wide enough audience.

- Finding new creative leadership will be key to returning the brand to growth.

Cutting costs and changing strategy

- A headcount freeze and supply chain savings as part of cost-saving measures.

- Limiting exposure to real estate - selling part of Ardian's Paris properties.

Luxury segment under pressure, competitors also struggling

- LVMH and Hermès report similar problems, although the latter benefits from a loyal clientele.

- Geopolitical uncertainty and the economic slowdown continue to affect the luxury goods market.

Although Gucci is still facing a downturn, the first positive signals from China and Kering's austerity measures suggest a possible stabilisation. The key will be to find a new Gucci designer who can reintroduce the brand to a wider audience.

For investors, Kering appears to be a riskier but potentially profitable bet on a revival of the luxury market. If a clear strategy for Gucci can be set and growth in key markets can be strengthened, there could be a turnaround in sentiment and a return to higher levels for the stock.