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Let’s make one thing clear — Kering Group’s four percent rate drop is not a red flag. Earlier this month it was announced that the luxury conglomerate saw a four percent year-over-year decrease at the end of 2023 as compared to 2022. It is only fair to point out that Kering is still making a profit but just not as much. Here’s why. In a bid to compete with the company’s primary luxury rival, LVMH Moët Hennessy Louis Vuitton, Kering has eyes on their long-term goals which will inevitably overcome their short-term shortfalls.
The B in Beauté
Kering Beauté was established in 2023 to create value for the group and its Houses alongside ensuring that Bottega Veneta, Balenciaga, Alexander McQueen — all of which are currently licensed to COTY — as well as the jewellery brands Pomellato, and Qeelin reach their full potential in beauty, which is, as the Group puts it, a natural extension of their universe. By hiring long-time executive of Estée Lauder, Raffaella Cornaggia, as the new CEO of Kering Beauté, Kering aims to tap into Cornaggia’s extensive beauty resumé which includes time spent at Tom Ford Beauty, MAC Cosmetics, and L’Oréal. The risk paid off as in June 2023, Kering Beauté procured luxury fragrance house Creed from BlackRock Long Term Private Capital Europe in an ambitious takeover that was helmed by Raffaella Cornaggia. The addition of Creed into the Kering family further reinstates the brand as the “largest global independent player in the high-end fragrance market”.
Read More: Kering Acquires Creed In A “Natural Extension” of The Group’s Luxury Universe
A is for Acquisition
Despite the decrease in Kering’s revenue, Kering Eyewear saw a record-setting 35 percent uptake in revenue for 2023 which equates to approximately USD 1.6 billion, which the company said was partially due to the consolidation of its Maui Jim brand, which Kering acquired in 2022. July 2023 saw The Kering Group make an acquisition bid towards Valentino, announcing that it bought a 30 percent stake in the Italian Maison for USD 1.83 billion in cash. The agreement gives Kering the option to acquire 100 percent of the share capital of Valentino by 2028. The transaction is part of a broader strategic partnership between Kering and Mayhoola, which could lead to Mayhoola becoming a shareholder in Kering. According to Kering, the strategic partnership will further support the brand’s elevation strategy implemented by Valentino CEO Jacopo Venturini under the ownership of Mayhoola. This sees Kering become a significant shareholder with board representation while Mayhoola remains the majority shareholder with 70 percent of the share capital.
Read More: Luxury Powerhouses: Kering Buys 30 Percent of Valentino, LVMH Pays US $166 Million To Sponsor The Paris 2024 Summer Olympics
Different Direction
In January 2023, Kering announced that Sabato De Sarno would assume the role of creative director for Gucci with the designer making his runway debut at Milan Women’s Fashion Week in September 2023. It is important to remember that Gucci accounts for nearly half of Kering’s revenues and is in the midst of regaining its momentum with Sabato De Sarno, replacing predecessor Alessandro Michele who had been at the helm of the Italian label since 2015.
Kering also pulled its brands from Farfetch after the group terminated its contract with the platform, with future orders intending to be shipped directly from the brands’ respective warehouses. This comes after Farfetch was sold to South Korean e-commerce giant Coupang, which according to Kering chief Jean-Marc Duplaix, was no longer considered a strategic partner for some of the group’s luxury brands.
Moving forward, the Kering Group recognises the importance of the Chinese market and is set to open 10 stores annually in China across a range of brands to bolster growth. According to the China Daily, Chinese customers accounted for 26 percent of the company’s total sales for the third quarter of 2023, signaling the importance of China as a key market for Kering.
Game, Set, Match
Decreased sales revenue doesn’t always indicate a company’s downturn. Be it having an eye on lucrative investments to acquiring key industry players, The Kering Group appears to be gearing up for perhaps its biggest growth to date. To sum up, the aforementioned question in the title, the future of decreased sales revenue at Kering does not look bad at all, in fact, it looks like the best is yet to come.
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Sanjeeva Suresh