Kering Jumps as Gucci Slide Eases

PPRUF +3.67% PPRUY -0.97%

THE GIST

Kering shares surged after the Gucci owner delivered results that were weak but clearly better than feared, paired with a more credible turnaround message from new chief executive Luca de Meo.

Sales are still falling and margins remain under pressure, but investors are betting that the group has finally found a floor. This was not a recovery quarter. It was a confidence reset.

WHAT HAPPENED

Kering said fourth quarter revenue fell 3% year on year on a comparable basis to €3.9 billion, beating expectations for a steeper decline. Shares jumped as much as 16% in early Paris trading before settling around 11% to 12% higher, one of the stock’s strongest sessions in years.

Gucci, Kering’s biggest brand by sales and profits, posted a 10% revenue decline to €1.6 billion in the quarter. That was still its tenth straight quarterly fall, but slightly ahead of forecasts. Saint Laurent sales were broadly flat, while Bottega Veneta and smaller brands including Balenciaga delivered single digit growth.

For full year 2025, group revenue fell 10% to €14.7 billion. Operating income dropped 33% to €1.6 billion, marking a second consecutive year of double digit profit declines. Net debt stood at €8.0 billion at year end, down around €2.5 billion from the end of 2024 following asset sales.

De Meo, who joined from Renault in September, said 2025 did not reflect Kering’s true potential and described recent sales momentum as early and fragile but real. The group proposed cutting its dividend to €4 per share from €6 a year earlier, including a €1 special dividend linked to the sale of its beauty business to L’Oréal for €4 billion. Kering also confirmed plans to close around 100 more stores in 2026 after shutting 75 last year.

WHY IT MATTERS

The market reaction says more about expectations than fundamentals. Kering entered this earnings season as one of European luxury’s most damaged names, with its share price down more than 50% over three years and investor trust badly eroded. In that context, simply showing that conditions are no longer deteriorating can trigger a powerful relief rally.

More importantly, investors appear to be buying into de Meo himself. As an outsider with a track record in industrial turnarounds, he has been unusually frank about past mistakes. He has pointed to overexpansion of the store network, excessive price increases during the post pandemic boom, and slow responses to changing consumer tastes. After years of upbeat messaging that failed to deliver, that realism carries weight.

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The store closure program is a concrete example. Luxury thrives on scarcity, yet Kering expanded aggressively when demand was strong, leaving it overexposed as the cycle turned. Closing roughly 175 stores across 2025 and 2026 is as much about brand discipline as cost cutting. Investors are treating that as evidence that strategy is finally aligning with reality.

Balance sheet repair also matters more in a slower luxury market. Net debt remains high relative to earnings, but the €4 billion beauty sale has reduced financial risk and signaled a willingness to prioritize resilience over empire building. That shift is being rewarded, even if it sacrifices a potential growth avenue.

Gucci remains the central risk. The brand accounts for the bulk of group profits and has lagged rivals badly on desirability and pricing power. There are early signs of stabilization, supported by new handbag launches and improving trends in most regions, but the creative reset under Demna is still unproven. His first major show later this month is a key near term catalyst.

The broader sector backdrop helps explain the enthusiasm. Luxury has been stuck in a prolonged slowdown after years of price hikes and fading Chinese demand. Recent signals from peers suggest conditions may be bottoming, even if a strong rebound is unlikely. Against that backdrop, Kering’s results were enough to support the idea that the worst may be over.

This rally is not a declaration of success. It is a bet that leadership, discipline and direction have finally replaced drift.

WHAT’S NEXT

Focus now turns to April’s capital markets day, when de Meo is expected to set out margin targets, cost savings and brand priorities. That will be the moment when credibility is tested against numbers.

Until then, investors will watch Gucci’s runway shows, further store closures and early 2026 trading trends. If stabilization continues, the recovery narrative can build. If it falters, this risks looking like another short lived bounce.

For now, Kering has achieved something rare after years of disappointment. The market is listening again.

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