Unpacking Kering’s Earnings

Today, Kering, the luxury conglomerate that owns Gucci, Yves Saint Laurent, Balenciaga, and Bottega Veneta, among others, reported its first quarter earnings, and the picture of the luxury industry it paints is even more dire than many thought. Overall sales are down by 14%, Gucci’s sales for the first three months of 2025 are down by 25%, as Kering’s biggest brand flounders in the wake of a creative director reshuffling. At Yves Saint Laurent, its second biggest brand, sales are down 9%. Frustratingly, Kering does not break out Balenciaga’s earnings, as it lumps them into “Other Houses,” which include McQueen, Brioni, and a handful of jewelry brands they own. But Kering dropped a couple of hints in its earnings report.

Overall revenue for “other houses” was down 11%. At the same time Kering boasted that sales grew at Brioni and its jewelry brands. Which means that most likely revenue at Balenciaga and McQueen dropped by more than 11%. Balenciaga may be dead in the water, except for its bags, which the brand has been pushing hard through relentless advertising. he performance of Balenciaga’s leather goods lines was very solid, against an ongoing drop in store traffic,” the company said. This also confirms what I see in the street during Paris Fashion Week – Balenciaga bags aplenty, but no more logoed jersey and almost no sneakers. The oversized black silhouette still reigns supreme for many fashion kids, but it looks like much of it is vintage – an easy substitute to Balenciaga’s offerings.

Meanwhile, Sean McGirr’s McQueen, which virtually no one seems to like, got exactly one sentence in the report, “Sales were down at McQueen.” One could almost hear the brusque curtness of an imperious father who does not even deign to bestow criticism on a child he deems totally hopeless.

Bottega Veneta once again offered a bright spot, with revenues up 4%. But with Matthieu Blazy defecting to Chanel, its future is now in question (though we at StyleZeitgeist root for Louise Trotter). Brioni, Kering’s high end tailoring line also grew slightly, as well as Kering’s eyewear and beauty division.

Now, what does it all mean? The picture the report paints is one that we already know.

1. Luxury fashion is a mass market phenomenon. According to a report cited in the Economist, two-thirds of the business comes from consumers who spend 2,000 euros or less per year. That equals a couple of Balenciaga t-shirts, a Gucci belt or a pair of loafers, and a fragrance. That market has now largely collapsed, squeezed by egregious price hikes, economic uncertainty, and the rising dupe culture. That customer will still make an occasional small splurge, as can be seen in Kering’s strong eyewear and beauty business.
2. The rich are fine. Only brands that cater to the 1%, like Hermes, Brunello Cucinelli and Loro Piana, are doing well. The strength at Brioni, one of the top suit makers in the world, confirms this.
3. There are only four untouchable luxury brands (for various reasons) – Chanel (incredible DNA and brand equity), Dior (ditto), Hermes (pinnacle of luxury positioning), and Louis Vuitton (#1 mass market brand, gets first dibs at middle class wallets). Kering has none. LVMH has two, and that’s why their luxury fashion sales are down only 5%.
4. Creative directors matter. The age of the primacy of the brand over the creative director may not exactly be at an end, but a slew of lackluster appointments show that talent still matters, and that big brands cannot coast on marketing alone.
5. This downturn is not only cyclical but structural. The luxury industry overall has lot a lot of credibility with its audience in the past couple of years through egregious price hikes and generally disdainful attitude, and it may take a long time to rebuild that trust. Consumer are turning to other things – vacations, dupes, concerts – to seek pleasure in.

My prediction is that this is far from over. All the trends that started at the end of 2023 are holding. With the looming stagflation (recession + inflation), and more likely price hikes on the horizon, things are not going to get better. Except similar earnings for the rest of the year if not beyond.