Kering Group's Q1 2024 Financial Results: Navigating Challenges in the Luxury Market

A detailed analysis of the Kering Group's brands Gucci, Saint Laurent, Bottega Veneta, Balenciaga and Alexander McQueen

Sectors & Markets

20 May, 2024

Table of contents

Kering Group released its financial results for the first quarter of 2024 on April 23, indicating a challenging period for the luxury sector conglomerate. The Group reported a total revenue of €4.504 billion, a decrease of 11% on a reported basis and 10% on a comparable basis from the previous year's €5.077 billion. This downturn reflects a combination of adverse macroeconomic conditions, weaker consumer traffic in retail, a decrease in wholesale activities, and negative foreign exchange impacts, despite some positive scope effects from the acquisition of Creed.
The revenue breakdown by region shows varied performance across different markets. Western Europe and North America exhibited relatively stable conditions compared to Q4 2023, but the Asia Pacific region continued to face volatile market conditions, contributing significantly to the overall decline. Notably, revenue from the Asia Pacific dropped by 6 percentage points, now representing 34% of the total revenue, indicating significant contraction in one of the group’s key markets.
On a brand-specific basis, Gucci experienced the steepest decline with a 21% drop in reported revenue, followed by Saint Laurent and Other Houses (which includes brands like Balenciaga and Alexander McQueen), reporting decreases of 8% and 7%, respectively. Kering Eyewear and Corporate, however, painted a brighter picture with a strong start, witnessing a revenue increase of 24% reported and 9% comparable, driven by robust performances across key brands and strategic expansions in product lines and market presence.

Performance of Q1 2024 vs Q1 2023

Overall Revenue

Year Revenue (€ million) Reported Change Comparable Change
2023 5.077 +2% +1%
2024 4.504 -11% -10%

Revenue by Brand


Year Revenue (€ million) Reported Change Comparable Change
2023 2.616 +1% +1%
2024 2.079 -21% -18%

Saint Laurent

Year Revenue (€ million) Reported Change Comparable Change
2023 806 +9% +8%
2024 740 -8% -6%

Bottega Veneta

Year Revenue (€ million) Reported Change Comparable Change
2023 395 +0% +0%
2024 388 -2% +2%

Other Houses (which includes brands like Balenciaga and Alexander McQueen)

Year Revenue (€ million) Reported Change Comparable Change
2023 890 -9% -9%
2024 824 -7% -6%

Kering Eyewear & Corporate

Year Revenue (€ million) Reported Change Comparable Change
2023 433 +41% +11%
2024 536 +24% +9%

Revenue by Region

In Western Europe, Kering Group experienced contrasting dynamics over two years. In 2023, the region reported strong performance characterized by an increase in retail activities and overall positive market dynamics. However, by 2024, while the market conditions had stabilized, the performance was generally down from the previous year, indicating some market saturation or external economic pressures.

North America presented a more mixed scenario. In 2023, the performance was uneven with some muted aspects, suggesting challenges in specific market segments or consumer demographics. This trend intensified in 2024, as the region continued to face challenges that led to a noticeable decrease in revenue, reflecting broader economic uncertainties or competitive pressures in the luxury goods market.

The Asia Pacific region showed a significant turnaround. After a phase of recovery in 2023, driven by a gradual recovery in China, the situation took a downturn in 2024. The region faced significant challenges and experienced a notable decrease in its revenue share, possibly due to geopolitical tensions, changes in consumer spending habits, or health-related disruptions affecting the luxury market.

Japan and the Rest of the World (RoW) displayed varying performances across the two years. In 2024, Japan showed growth, suggesting effective market strategies or recovery from previous lows. Conversely, the Rest of the World maintained a relatively stable contribution, indicating a balanced approach to market conditions and possibly benefiting from diversified market operations and strategies.

Channel Performance

In terms of channel performance, Kering Group's retail and e-commerce operations demonstrated divergent results over the two years. In 2023, the company enjoyed positive growth overall, propelled by strong retail strategies that effectively captured consumer interest and drove sales. However, the landscape shifted drastically by 2024, where the sector saw a significant decline. This downturn reflected weakened consumer traffic and challenging market conditions that impacted spending behaviour and overall retail engagement.

The wholesale channel also faced challenges. In 2023, there was a sharp decline in wholesale operations, which aligned with Kering's strategic pivot towards strengthening its direct retail presence. This move was part of a broader trend within luxury brands to enhance control over brand representation and consumer experience. The decline continued into 2024, with the company maintaining a selective strategy and adopting a cautious approach, particularly in the U.S. market. This strategy was likely a response to the evolving retail landscape and the need to optimize market penetration and profitability in highly competitive environments.

Key Observations and Strategic Shifts

Observing key strategic shifts, 2023 was a year marked by positive recovery dynamics in key markets, with Kering focusing on high-visibility communications and elevation strategies that aimed to enhance brand prestige and appeal. These efforts were particularly focused on strengthening market positions and enhancing consumer perceptions. Moving into 2024, the emphasis shifted significantly towards managing more challenging market conditions. The group invested in brand desirability and made strategic adjustments to collections to align with evolving market demands and consumer preferences. This strategic realignment was crucial for navigating the uncertainties of the global luxury market and maintaining relevance and competitiveness.

The year-over-year comparison reveals a marked decline in Kering's performance in Q1 2024, influenced heavily by external market conditions and strategic shifts within the company.

Future Outlook and Strategic Analysis

Looking forward, Kering Group is poised to continue its strategic investments aimed at enhancing brand desirability and strengthening its long-term market positioning. The Group has prioritized initiatives like the introduction of new collections, which, though currently represent less than 7% of sales, are expected to play a crucial role in rejuvenating existing lines and enriching the product offerings in the medium term.

From an analytical perspective, Kering’s focus on high-end and luxury segments appears to be a calculated move to leverage its strong brand equity in a bid to counterbalance the softening demand in more volatile markets like Asia Pacific. The Group's selective wholesale strategy and the strong performance in royalties, particularly from eyewear and perfumes, suggest a resilient diversification strategy that could help stabilize revenue streams against fluctuating retail sales.

Moreover, the recent downturn presents an opportunity for Kering to assess its operational efficiencies and possibly restructure its market strategies, especially in underperforming regions. The emphasis on directly operated stores and e-commerce platforms could be pivotal in capturing a larger share of consumer spending that is increasingly shifting online, particularly in response to ongoing global challenges such as health concerns and travel restrictions. As the luxury market continues to evolve, Kering's ability to adapt and innovate will be critical in maintaining its competitive edge and driving future growth.

Read the full Kering Group report Here.

Cover Image Courtesy: Kering Group, Facebook Page