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Kering struggles to keep up with rivals as luxury demand cools


Kering struggles to keep up with rivals as luxury demand cools


French luxury group Kering, owner of brands such as Gucci, Yves Saint Laurent and Balenciaga, reported a bigger-than-expected drop in the third quarter sales on Tuesday, as it faced a slowdown in the global appetite for high-end fashion and accessories.


The company said that its revenues for the three months ended September 30 fell by 9% at constant currencies and scope, to 4.46 billion euros ($4.72 billion), below analysts' expectations for a 6% decline.


Kering's performance was worse than its main competitors, such as LVMH and Hermes. which both posted sales growth in the same period, despite the challenging economic environment.


One of the main reasons for Kering's disappointing results was the weak performance of its flagship brand Gucci, which accounts for over half of its annual sales and profits. Gucci saw its sales drop by 7% in the third quarter, as it struggled to regain momentum after a period of lackluster growth.


Gucci is undergoing a major overhaul, led by its new CEO Marco Bizzarri and creative director Alessandro Michele, who are trying to revitalize the brand's image and appeal to younger and more diverse customers.


However, the transformation has not yet paid off, as Gucci faces fierce competition from other brands that have been more successful in capturing the attention and wallets of fashion lovers, such as Dior and Louis Vuitton.


Kering's other fashion labels also suffered in the quarter, with Saint Laurent posting a 12% fall in sales and Bottega Veneta down 7%. The company said that its performance was partly affected by its strategy of reducing sales through wholesale channels, in order to protect its brands' exclusivity and profitability.


Kering's deputy CEO Jean-Marc Duplaix told reporters that the company was confident in its ability to overcome the current challenges and achieve long-term growth. He said that Kering was investing in innovation, sustainability and digitalization, as well as expanding its presence in emerging markets such as China, where luxury demand remains strong.


However, some analysts are skeptical about Kering's prospects, given the uncertain outlook for the luxury sector. which faces headwinds from rising inflation, supply chain disruptions and geopolitical tensions.


According to Bernstein analyst Luca Solca, Kering needs to accelerate its turnaround efforts and prove that it can deliver consistent and profitable growth. He said that Kering's valuation was "stretched" compared to its peers, and that he expected the stock to underperform in the near term.

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