Is Gucci, which is losing ground, seeing a steady rise in its stock price?
Author | Huang Yida
Editor | Zhang Fan
After entering the second quarter of this year, the stock price of French luxury giant Kering Group, the parent company of the famous luxury brand Gucci, has skyrocketed. From April 7th to October 13th, the stock price soared by over 82%, leading the gains among the constituent stocks of the French CAC 40 index during the same period. Before this rally, Kering's stock price had been on a downward trend for more than three years, from Q3 2021 to Q1 2025, with a decline of approximately 80%, hitting rock bottom.
Chart: Kering Group's stock performance; Source: Wind, 36Kr
As we all know, the luxury industry has faced challenges in the past three years, yet the stock performance of different companies varies significantly. Kering's revenue and profit have both declined, especially the net profit, which has shrunk substantially. Hermès International, on the other hand, has shown stronger resilience in its performance, but its stock price has been weakening since February this year, and the downward trend continues. LVMH, whose performance lies between Hermès and Kering, has also seen a slight increase in its stock price since late June.
The appreciation of the euro this year has had a significant impact on these European luxury brands. Public information shows that brands such as Hermès, Gucci, Tiffany, Cartier, and Rolex have raised their prices considerably this year. Against the backdrop of an economic downturn, the appreciation of the euro combined with price hikes has led to a slowdown in the luxury market. Even top luxury brands like Hermès have been affected by the external environment, and their stock prices have adjusted accordingly.
So, why has Gucci's stock price soared this year, despite being affected by the euro's appreciation?
01 Continuous Performance Decline, Strategic Restructuring is the Key
Looking back at Kering's performance in recent years, after reaching a peak in 2021, its growth slowed down significantly in 2022. In 2023 and 2024, the company's performance declined year after year. Since the beginning of this year, although the decline in revenue has deepened, there has been a slight improvement in net profit.
Chart: Year-on-year growth rate of Kering Group's revenue and profit (Unit: %); Source: Wind, 36Kr
Looking at the revenue by region, the Asia-Pacific region (excluding Japan) has a decisive impact on Kering's performance. On the one hand, the Asia-Pacific region has contributed the most to Kering's revenue in the past five years, accounting for nearly 40% at its peak. On the other hand, compared with other regions, the revenue in the Asia-Pacific region has been more volatile in recent years. Due to its significant contribution to the overall revenue, the revenue fluctuations in this region directly affect the company's overall performance.
Financially speaking, in 2021, when Kering's performance was at its peak, the revenue in the Asia-Pacific region increased by 35% year-on-year, driving the company's overall growth. In the first half of this year, however, the revenue in the Asia-Pacific region decreased by 22% year-on-year, the highest decline among all regions. As a result, the revenue contribution from the Asia-Pacific region dropped to 29% in the first half of this year, on par with Western Europe.
Chart: Year-on-year change in Kering Group's regional revenue in H1 2025; Source: Company financial report, 36Kr
Therefore, as of the first half of this year, the top three regions contributing to Kering's revenue are Western Europe, the Asia-Pacific region, and North America, accounting for approximately 82% of the company's total revenue. Looking at the marginal changes in regional revenue in the first two quarters of this year, although the revenue contribution from Western Europe has caught up with that of the Asia-Pacific region, its revenue growth has slowed down in Q2 due to the weak tourism industry. In the Asia-Pacific region and North America, although there has been a slight improvement in revenue growth in Q2, the decline in revenue is still significant.
Although the performance outlook in the Asia-Pacific region and North America has improved slightly, it has provided some support for the company's overall revenue expectations. However, the macroeconomic outlook in these three core regions remains negative in the medium term. Therefore, as a leading luxury brand, Kering Group will face challenges in the reverse economic cycle for a long time.
In terms of core brands, Kering Group owns three core brands: Gucci, Saint Laurent, and Bottega Veneta. Other well-known brands such as Balenciaga, Brioni, and jewelry are classified as other brands. In terms of brand revenue structure, Gucci is the main contributor to the company's revenue, accounting for approximately 39% of the total revenue in the first half of this year. However, due to weak consumer demand, Gucci's revenue decreased by 25% year-on-year in the first half of this year.
Chart: Kering Group's revenue structure in H1 2025; Source: Company financial report, 36Kr
Meanwhile, the revenue of Saint Laurent decreased by 10% year-on-year in the same period, and the revenue of other brands decreased by 14%. Among the core brands, only Bottega Veneta saw positive growth, with a 2% increase in revenue, accounting for approximately 11% of the total revenue. The revenue of eyewear & beauty products increased by 3% year-on-year.
The revenue from Bottega Veneta and eyewear & beauty products accounted for approximately one-fourth of the company's total revenue in the first half of this year. Although these two segments achieved modest growth, their contribution to the company's overall revenue growth was limited, given the significant decline in revenue from Gucci and Saint Laurent.
Overall, given the weak macroeconomic outlook in Kering's major markets, the reverse economic cycle has dampened consumer demand for luxury goods, creating a challenging environment for the company's business. Moreover, the weak demand for core products from brands such as Gucci, Saint Laurent, and Balenciaga is due to various factors, including a decline in brand power, intensified competition, and a mismatch with the new consumption trends.
In terms of performance expectations, Kering's revenue is expected to remain weak, while the revenue growth in core regions such as the Asia-Pacific and North America is expected to improve marginally. However, it is difficult to reverse the external environment and the weak demand for core products in the short term. Therefore, the marginal improvement in revenue in core regions will have limited impact on the company's overall performance.
With the continued pressure on revenue, the key to improving the company's profit expectations lies in the ongoing strategic restructuring. One of the key aspects is channel contraction. The company has raised its target for net store closures to 80 this year. Gucci has already closed 16 full-price stores in the first half of this year and plans to further reduce its presence in outlet malls. From 2026 to 2027, Kering will continue its strategy of small-scale net store closures.
In June this year, Gucci closed its outlet store in Pudong, Shanghai. Reducing the scale of outlet malls is crucial for reshaping brand value. First, closing outlet stores helps Gucci shed the "discount-dependent" label and restore its high-end brand image, aligning it with non-discount brands such as Hermès and Chanel. This also paves the way for price increases. Second, it helps optimize the product portfolio, reducing the number of "outlet" products and allowing the company to allocate more resources to innovative and popular products, which is in line with the trend of luxury consumption among Generation Z, who prefer non-logo and niche luxury products.
Looking at the marginal improvement in the company's net profit in the first half of this year from the perspective of strategic restructuring, in the face of weak demand for core products and continuous revenue decline, the continuous net store closures are essentially a cost-control measure to reduce losses. By reshaping brand value and increasing the prices of core products, the company can strengthen its brand image and improve its profit margin to some extent. The continuous decline in performance has also created a low-base effect. Therefore, looking optimistically at the second half of the year, the expectation of marginal improvement in Kering's performance is expected to continue.
The strategic adjustment of Kering's major shareholder, Artémis Group, is worth noting. The group focuses on asset preservation, reducing financial leverage, and avoiding large-scale acquisitions, which is in line with Kering's ongoing channel contraction strategy. This indicates that under the influence of Artémis Group, Kering will adopt a more conservative strategy in the future.
02 Why has the Stock Price Soared Despite Weak Performance?
On the surface, there is a significant divergence between Kering's fundamentals and its stock price. In fact, the continuous rise in Kering's stock price since April this year can be attributed to the following two main factors:
1. The valuation was relatively low at the beginning of the rally;
2. Reshaping brand value and channel contraction to stop losses.
On April 7th, the starting point of this rally, Kering's PE-TTM was less than 18 times, lower than the average of the past three years, providing a certain level of safety margin for investors. On July 29th, after the release of Kering's semi-annual report, the valuation was significantly inflated due to the continued decline in net profit.
Against the backdrop of continuous revenue decline, the purpose of strategic restructuring is to improve the net profit expectation by reshaping brand value and channel contraction. Investors have recognized the potential for marginal improvement in Kering's performance through brand value reshaping and channel contraction, which has led to an increase in the stock price. However, the current stock price has already priced in some of these expectations.
Comparing horizontally, in terms of fundamentals, Hermès International has strong brand power and high customer loyalty, resulting in stable growth in consumer demand for its products. Therefore, its performance outlook is positive. However, its valuation is higher than that of Kering and LVMH over a three-year period. LVMH's performance outlook is more optimistic than Kering's, and its valuation has been at a relatively low level for a long time.
The weakening of Hermès International's stock price since February this year reflects two factors. On the one hand, investors lack confidence in the future economic outlook in the reverse economic cycle. On the other hand, although Hermès International's valuation is relatively low, with a three-year valuation percentile of only 10%, its valuation is still higher than the industry average, which has raised concerns among investors about its safety margin.
The logic behind LVMH's stock price movement is similar to that of Kering, but its performance outlook is more optimistic, and it has a better safety margin. The fundamentals provide some support for its stock price.
For Kering, the expectation of brand reshaping and marginal improvement in performance, combined with the low valuation at the beginning, has attracted some investors. Recently, some overseas financial institutions have upgraded Kering's investment rating, which has also contributed to the increase in its stock price. However, it should be noted that Kering's current PE-TTM has exceeded 50 times. Given its weak performance outlook and high valuation, there is a significant risk of a short-term correction in the stock price.
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