Paris — Luxury conglomerate Kering reported a steeper-than-expected 15% drop in second-quarter sales, with its flagship brand Gucci plummeting 25%, underscoring the profound challenges facing the group as it seeks a path to recovery. The results, which fell short of analyst forecasts across all regions, highlight the dual pressures of weak demand in key markets and a crisis of brand desirability that incoming CEO Luca de Meo must urgently address.

Total group revenue fell to 3.7 billion euros ($4.27 billion), missing estimates of 3.96 billion euros. The decline was led by sharp contractions in Japan and the wider Asia-Pacific region, reflecting what analysts call a "tough reality" as Kering's core markets in China and the United States remain under strain. Chairman François-Henri Pinault acknowledged the disappointing numbers but insisted the groundwork laid over the past two years has set "healthy foundations" for long-term growth.

Leadership Change and the Pricing Power Dilemma

All eyes are now on de Meo, the auto industry veteran set to take the helm in September, who is credited with a strong turnaround track record. His immediate task is multifaceted: reviving the creative momentum at Gucci under new artistic director Demna Gvasalia, whose full vision will debut in early 2026, while navigating immediate economic headwinds.

CFO Armelle Poulou stated that anticipated 15% U.S. tariffs are "manageable through pricing adjustments," with some increases already implemented and a potential second wave in the autumn. However, analysts caution that Kering's core problem is a lack of pricing power compared to rivals like Hermès. "Product desirability is now a bigger problem for Kering than any tariff threat," noted Third Bridge's Yanmei Tang.

A High-Stakes Reinvention in a Uncertain Climate

The quarter's performance signals that Kering's turnaround is still in its early, painful stages. The company's strategic pivot hinges on successfully executing a brand reinvention that feels fresh and compelling to consumers—a high-stakes creative endeavor in a competitive luxury ecosystem where sentiment is fragile. For de Meo, the mandate is clear: restore the magic at Gucci and its sister brands while implementing a shrewd financial and operational maneuver to stabilize the business in an uncertain geopolitical and economic environment.