PARIS — One year into its comprehensive turnaround under the leadership of chief executive officer Luca de Meo, French luxury conglomerate Kering is doubling down on a strategy of creative director renewal to reignite consumer demand. The high-stakes maneuver comes as the group navigates a persistently challenging global macroeconomic environment, ongoing structural shifts, and a sharp slowdown in critical international markets like China.
However, the path forward is proving complex. With vacant designer positions still waiting to be filled at both Saint Laurent and Alexander McQueen, lingering industry rumors regarding yet another potential change of guard at Balenciaga, and ongoing questions from investors regarding how consumers will ultimately respond to Demna’s evolving vision at Gucci, market anxiety is palpable. Many financial analysts and stakeholders are increasingly worried that this relentless wave of creative churn may present more of an operational hurdle than a strategic opportunity during an already fragile recovery phase.
Kering’s overall growth engine noticeably stalled during the third quarter, hampered significantly by Gucci’s ongoing struggles to regain its historical momentum. This slowdown occurred against the backdrop of a broader, sector-wide contraction in luxury demand originating out of mainland China, which has rippled across the entire high-end European fashion landscape.
The French luxury group reported that its revenues for the three-month period ended September 30 remained entirely flat at reported exchange rates, totaling 3.35 billion euros. In organic terms, this translated to a 1 percent decrease, which actually came in slightly ahead of the consensus forecasts compiled by analysts, who had projected a more pessimistic 1.3 percent organic sales drop.
Yet beneath the consolidated figures, Gucci—serving as the group’s indisputable star brand and primary profit engine—missed market expectations decisively. The Italian luxury house posted a 6 percent drop in sales at constant exchange rates for the quarter, performing worse than the 5.4 percent decrease anticipated by Wall Street and European analysts alike.
This latest setback followed a comparatively mild 2 percent decline in the second quarter, a period that had briefly offered a glimmer of hope by demonstrating the group’s first comparable sales increase in three years.
The compounding challenges came to a head during a conference call held on Thursday afternoon after the close of the market. Chief financial officer Armelle Poulou found herself peppered with probing questions from financial analysts, many of whom expressed deep fears that the frequent musical chairs among top designers would ultimately delay Kering’s nascent, hard-fought recovery.
One particularly pointed question challenged the management team on why Anthony Vaccarello departed from Saint Laurent earlier this month, especially given that the brand stood out as virtually the only major house within the fashion division that was still enjoying positive, steady momentum.
Fielding the investor questions without CEO Luca de Meo by her side for the first time since his high-profile arrival last year, Poulou maintained a steady defense. She insisted that all recent executive and creative decisions were direct consequences of the rigorous strategic blueprint de Meo laid out during a comprehensive Capital Markets Day held in Florence earlier in the spring.
"Each brand is on a specific trajectory, and each situation is very different," Poulou told the assembly of analysts.
Defending the timing of the transition at Saint Laurent, she argued that the brand’s current strength actually provided an ideal foundation for a graceful handoff. "Saint Laurent is experiencing strong momentum, and we are very happy about it. The change of creative director is opening a new chapter after 10 years of success. It’s also good from time to time to bring a new point of view to the brand."
Looking ahead, Poulou outlined the key operational priorities and growth drivers for the house under new leadership. "Our priority and our growth levers at Saint Laurent is to develop the day wardrobe, to develop the main line to be more relevant in China, and we are very confident that the new creative director, together with the Saint Laurent teams, will be able to contribute to the development of this plan."
Those ambitions are substantial. Among the ambitious targets announced by de Meo back in April, the chief executive stated his firm intention to double both Saint Laurent’s menswear footprint and its overall business in Asia by the year 2030.
Team Effort
Addressing the immediate future of the group’s creative roster, Poulou promised that Kering would formally name new creative directors at both Saint Laurent and Alexander McQueen "very shortly." However, she deliberately refrained from providing any specific timeline regarding when these incoming designers would present their debut collections to the public.
The high-profile exit of Seán McGirr from Alexander McQueen after a tenure lasting three years has coincided with a substantial, painful retrenchment of the business operations. This restructuring has involved difficult workforce layoffs and targeted boutique closures worldwide. According to Poulou, the incoming successor will be handed the demanding task of overseeing "the repositioning of the brand with a British tailoring approach with a very bold point of view."
At the same time, the chief financial officer firmly declined to comment on widespread industry speculation regarding another potential changing of the guard at Balenciaga, where creative director Pierpaolo Piccioli is currently applying his renowned haute couture expertise to steer the historic house back toward its foundational design roots.
When queried directly on whether corporate management remains fully satisfied with Demna’s ongoing creative work at Gucci, Poulou shifted the focus toward structural improvements. She emphasized that Kering is actively putting in place a "more efficient operating model" structured around its creative directors. The goal of this internal reorganization is to ensure that every visionary statement made by a designer is comprehensively backed up by robust, synchronized product development, targeted marketing, and disciplined merchandising teams.
That structural overhaul echoes sentiments shared by de Meo earlier this month. In an exclusive interview with WWD, the chief executive articulated his primary corporate ambition: to completely "re-engineer" the traditional creative process within the luxury sector.
"A creative director for me is like a captain, the playmaker of a team. He’s the one that has more talent, that kind of technical ability to solve the game in an unexpected way," explained the former Renault Group boss, drawing parallels from the automotive world to high fashion.
"But without a [support] system around, I believe that we cannot run multibillion, multicategory, multi-geography businesses and ask them to do everything from store layout to marketing," de Meo added. "So I will try to change the way the studio interacts with the rest of the organization in the spirit of finding a more collaborative way of handling the complexity."
Driving Store Traffic
Geographically, Kering’s performance across global markets during the third quarter remained a mixed bag. Comparable revenues registered an increase of 2 percent in North America, rose 4 percent in Japan, and ticked up 2 percent across the rest of the world. However, these gains were heavily counterbalanced by a 5 percent drop in the crucial Asia-Pacific region and a 2 percent decline across Western Europe.
"Clearly, the performance of the third quarter is not where we want it to be, but beneath the top line, the actions we have taken are becoming increasingly visible," Poulou remarked candidly to stakeholders.
While Kering no longer breaks out the granular financial performance of its smaller individual fashion houses, organic sales within its broader fashion and leather goods division contracted by 3 percent during the three-month reporting period. By way of comparison, rival luxury titan LVMH Moët Hennessy Louis Vuitton reported that organic sales in its own powerhouse fashion and leather goods unit fell 5 percent year-over-year, similarly dragged down by the steep, prolonged slowdown in consumer demand throughout China.
For Gucci, the quarter was undeniably challenged by difficult comparative figures from previous years. Yet the primary operational hurdle remained weak physical store traffic across both mainland China and the United States. Even so, internal metrics revealed encouraging glimmers of hope, suggesting that the brand’s newly introduced product lines are strongly resonating with the clients who do walk through the doors.
"Even in this environment, in every region, we are pleased to see that we had an improvement of the conversion, an improvement of the average ticket and average unit price and also cross-selling," Poulou noted. "So, difficult traffic, but once the customer is in the store, good reception with the newness."
Addressing widespread media reports concerning price cuts at Gucci, Poulou took the opportunity to clarify the strategy, explaining that these adjustments were strictly selective. They were designed primarily to clear out remaining seasonal inventory inherited from the era of previous creative director Sabato De Sarno.
"It’s also a way sometimes to bring some clients to store, and actually it was very interesting to see that we did a lot of cross-selling," she elaborated. "But for us, the focus is really on recreating a desirable offer with the right pricing architecture and an improved quality perception and both are very important."
Poulou added that while Gucci’s fall collections leaned toward a much more fashion-forward aesthetic designed to capture the attention of high-end consumers and generate massive industry buzz, the upcoming GucciCore cruise collection—scheduled to arrive in retail boutiques in November—is expected to have a much broader commercial appeal. It is specifically tailored to court a wider, aspirational consumer cohort while effectively rounding out the brand’s ready-to-wear and footwear product offerings.
China Strategy
Sales across the conglomerate were also impacted by ongoing store rationalization efforts. Kering shuttered a total of 105 retail units globally during the first nine months of the year, a figure that includes 25 Gucci boutiques. Consequently, management has revised its full-year expectations upward, now targeting 125 net store closures for the entirety of 2026, compared to a previous goal of 100 closures.
To counteract sluggish retail traffic, the group plans to step up media investments, reinforce its core brand communications, and intensify targeted clienteling efforts throughout the fourth quarter. As part of this push, Kering will unveil an entirely new Gucci store concept situated on the prestigious Avenue Montaigne in Paris this November, according to Poulou.
In China specifically, Kering is deliberately decentralizing its approach by devolving significantly more autonomy and decision-making responsibility to local management teams on the ground.
"Estamos putting Chinese clients more firmly at the center of our actions, stepping up outreach to top clients, timing major product moments around local occasions and conceiving campaigns in and for China rather than adapting global ones," Poulou explained, further revealing the establishment of a dedicated content creation factory directly within China.
Meanwhile, the group continues to witness healthy, resilient market prospects within its jewelry division, despite the fact that comparable growth in that segment decelerated to 11 percent in the third quarter down from 18 percent in the preceding three months, as the broader economic slowdown in China similarly impacted sales at Qeelin.
"With strong desirability, a growing retail footprint and an increasingly integrated industrial backbone, we are confident in jewelry’s ability to increase its contribution to group revenue over time," Poulou stated, noting that Kering will outline its comprehensive strategic priorities for the jewelry business during a dedicated Kering Jewelry Day scheduled for Paris on December 2.
Kering’s third-quarter financial disclosures arrived hot on the heels of a similarly disappointing market update from Hermès International, which reported earlier on Thursday that its third-quarter revenues grew by 4.3 percent at constant exchange rates, marking its weakest quarterly growth rate in six full years.
Despite the difficult near-term macroeconomic realities and the undeniable friction of ongoing corporate transformations, Kering firmly reaffirmed its overarching objective of improving its recurring operating margin across 2026, even though management does not currently anticipate a sequential improvement in the second half of the year compared to the first half.
"We are clear-eyed about the work still ahead," Poulou concluded.
