Discussion: The State of Kering

[LadyJunon]

1) the father is very, extremely, irritated by the son's lack of strategy, about Gucci first, but also about CAA, Creed, Valentino and the extremely expensive real estate acquisitions... and in the very same time, the son refused L'Oréal asking price of €4.5 b for YSL Beauté, which could have been a platform to develop Gucci and BV beauty.

I'm not suprised at all. Apparently, PPR went through a somewhat similarly messy period in the mid 00s. While a 4.5bn purchase is steep, a pontential platform for beauty line development would help much more than these real estate acquisitions ever could. Owning Saint Laurent as a "whole" would do wonders for their corporate image too.

2) they approached 6/7 candidates after Bizarri ousting, but none of the potential candidates wanted the job (one of them even described the position as "un bâton de merde"), and that's the reason why Palus the interim CEO will become permanent CEO (that's was not the initial, proclaimed, plan).
Bellettini did everything in her power to stay at YSL and oversee the other brands, but from afar, and she crosses her finger to NOT get offered the job a second time.

I don't blame them. While leading such a big brand can be a wonderful opportunity, it takes a certain level of dellusion to want to lead a big brand that's only in a major overhaul, but is responsible for the majority of the income of its parent company (which also in need of an overhaul).

3) they are also disappointed by Blazy, or more precisely by BV performance, but Blazy's 3-year contract expires next November, so they have to take a decision now and have absolutely not clues about what to do... they'll probably renew him to avoid another brand in complete revamp.

Blazy got lucky here. On top of trying to convince clients on the new Gucci and McQueen, helping Mayhoola find a new CD for Valentino and accelerating Saint Laurent, they probably don't have the time or energy to support another revamp.

4) also disappointed by YSL, which stopped to grow 18 months ago, and by AV two latest collections: they also have absolutely no clue how to produce and sell the F/W womenswear (which is 95% sheer), and same thing for the menswear, which another in-house snake described as "rushed" and "forgettable"... The son is incredibly angered there are no leather goods or bags on the runways, but AV is adamantly against it.

I genuinely applaud Belletini and Vaccarello on what they did for Saint Laurent, but I think that this is the best they could for the brand. It will probably impossible to get past 3bn without getting YSL Beauty back. Also, Vaccarello has become somewhat of a "media/industry darling", so replacing him might do more harm than good.

5) they see Mayhoola has a potential ally or white-knight, because Kering can pay the remaining 70% of Valentino with their own Kering stocks, a move that would push Mayhoola as de facto the 2nd largest shareholder in Kering. My little bird and I agree that they should on the contrary beware of the Qataris, once they get a foothold inside Kering they will have a strong position for activism or a takeover.

To quote a Stan Twitter meme I posted earlier on this thread: "Don't stop, go on!" Seriously though, I personally wouldn't be mad at a Mayhoola takeover, even though I'd prefer a Kering-Richemot merger.

 

[TerraVera]

4) also disappointed by YSL, which stopped to grow 18 months ago, and by AV two latest collections: they also have absolutely no clue how to produce and sell the F/W womenswear (which is 95% sheer), and same thing for the menswear, which another in-house snake described as "rushed" and "forgettable"... The son is incredibly angered there are no leather goods or bags on the runways, but AV is adamantly against it.

it's interesting they relayed this to you considering you argued with me about my unimpressed "t*tties on the runway" comment and now look. it was hard for me to see how they were going to sell all that sheerness. it was too much and very lazy.

i've been one of those who have been meh about anthony at YSL. i wish he were able to do more at his own label or keep true to himself and use his skills to adapt upon YSL not issue copies of the archive. i really thought he was gonna move up at versace, form a duo-design team with donatella. like miuccia and raf, design for the atelier, because that's his aesthetic. but... it wasn't in the cards.

what i'm more concerned about is baby pinault's impatience, poor corporate and work culture, and hyperfocus on profit. it's obviously biting him in the butt, but he is staunchly refusing any course-correction like a typical cantankerous, grouchy old man who refuses to update his dilapidated, rickety, hanging-on-for-life house slwoly sliding off the hill. he'll throw money at everything superficial - new paint, new floors, some air freshener, not the actual problem (the plumbing, the leaks causing mold, the rat infestation in the basement) causing issues. his pedestal is gonna collapse under him unless he addresses and remedies kering's rot from the inside out. honestly, he's the problem. he might need to consider a two-year sabbatical because it's no longer working with him there in that capacity.

something's gotta give

i don't think mayhoola has the ingenuity to do anything besides add another gem to the qatari royal family's treasure trove. like armani and valentino, kering is something that looks good and will bring them some money. they seem pretty hands off, leaving brands to their own devices, which, as we've seen with Valentino, is not always a good thing. they couldn't even grow quela, the failed leather bag brand sheikha mozah started and it doesn't seem they've made any traction with le tanneur or anya hindrich. they're passive shareholders, who appear to still not really know how to properly run a luxury brand. i would be surprised if they became more hands-on.

 

[Nimsay]

I thought gucci watches were a license bc when i see them - not often - theyre next to the versace and ferragamo. Both of those are licenses… gucci watches are so off my radar it doesnt even matter. Also the designs are awful and look like licenses. The section Gucci is in is not considered seriously horlogerie…

LV watches cost 11k for a stainless. Thats more than a comparable Rolex. A little less than Patek which is generally considered the best money can buy.

 

[Lola701]

I'm not suprised at all. Apparently, PPR went through a somewhat similarly messy period in the mid 00s. While a 4.5bn purchase is steep, a pontential platform for beauty line development would help much more than these real estate acquisitions ever could. Owning Saint Laurent as a "whole" would do wonders for their corporate image too.

Tbh, selling YSL beauté was again a short term strategy on François Henry’s part. In reality, he never had any strategy to begin with.
Tom and Domenico had a strategy obviously. Each brand had a specific identity and even positioning within the group and the market. Gucci was the opponent of Vuitton. The goal was to have YSL against Chanel, Bottega Veneta against Hermes (that’s why they hired Tomas Maier from Hermes), Balenciaga, McQueen and Stella McCartney were more fashion oriented-almost niche brands. Boucheron was supposed to go against Cartier!

I get it, Pinault expected to have a miracle and to have all those brands to perform super fast. But they didn’t. If I remember well, I think Balenciaga and YSL became profitable in 2007.
At that time, Gucci and BV were already the driving forces of the group but I don’t think that apart from opening boutiques they really though about developing those brands.

Everybody knows that Arnault and his lieutenant are really hands-on regarding the development of their brands. Pinault was lucky, the creative directors of the brands he had were almost doing all the work with their CEO, for him.

When you think that LVMH still owns Kenzo perfumes, Loewe perfumes or even Givenchy perfumes, you understand that selling YSL beauty was a dumb move. Btw I suspect that Arnault might get rid of Marc Jacobs one day even more considering that Coty handles the beauty now.

Now they have Balenciaga and BV back as part of their beauty division but it’s insane to think that the biggest brands of the group, Gucci and YSL have both of their beauty division outside of the entity KERING.

LV watches cost 11k for a stainless. Thats more than a comparable Rolex. A little less than Patek which is generally considered the best money can buy.

But I think this is again a genius long term move for Vuitton!
They have invested heavily in their manufactures, in marketing and they have at heart to be taken seriously by the watch world.
You don’t buy a Vuitton watch for status but rather like a « achat plaisir ». And their distribution again is their best asset.

What they are doing now might have an impact in 10/20 years.

Hermes started to do watches seriously in the 80’s. Despite not being in the same club as Rolex, Patek and others, they are respected in that world. The same for Chanel.

 

[LadyJunon]

Kering has appointed two members to their executive committee and will make further changes later this month.

Kering Adds Two to Executive Committee
The group’s chief strategy officer Mélanie Flouquet and chief financial officer Armelle Poulou bring the committee’s count to 13 and 46 percent women.

By LILY TEMPLETON
APRIL 2, 2024, 12:05PM

PARIS — Kering has added two female members to its executive committee, the French group said Tuesday.

Effective immediately, the move brings the committee up to 13 members and 46 percent women, the company said in a statement revealing the nomination of Mélanie Flouquet and Armelle Poulou to the body.

Milan-based Flouquet, Kering’s chief strategy officer, joined the French group in May 2021 following a 20-year career at JP Morgan, where she was most recently managing director leading the luxury goods equity research team.

A dual graduate of EM Lyon and Lancaster University, she is also a chartered accountant in the U.K. and cut her teeth at KPMG.

Currently the group’s chief financial officer, Poulou took up the position in September 2023 after her predecessor Jean-Marc Duplaix become deputy chief executive officer in charge of operations and finance in a management restructuring.

A 1993 graduate of elite French business school HEC, she joined Kering in 2019 and served as its director of corporate finance, treasury and insurance after spending more than two decades at France’s state-owned multinational electric utility company EDF.

Kering is due to release its first-quarter revenue on April 23. It issued a dramatic profit warning on March 19 that revealed it is expecting a 10 percent decline in its consolidated revenue over the period, owing to a tougher-than-expected turnaround for its star brand Gucci.

Having flagged in February another year of financial pain as it pursues its brand elevation strategy against a background of slowing luxury spending, the French group continues to lag competitors as it implements the Gucci turnaround and seeks to rev up the ailing Balenciaga and Alexander McQueen labels.

At the annual general meeting on April 25, Kering will also propose three new independent directors — Rachel Duan, Giovanna Melandri and Dominique D’Hinnin — to join its board. Their appointment follows the departure of French Ivorian banking executive Tidjane Thiam, who is pursuing political ambitions; Jean-François Palus, who stepped into the role of chairman and CEO of Gucci, and the actress Emma Watson, whose three-year term as chair of Kering’s sustainability committee is set to expire.

Source: WWD

 

[Nimsay]

Oh i forgot they gave emma watson a board member role…

 

[upNorth]

 

[Frederic01]

^^ All of these management and CEO changes won't do much when the actual problem is at the design level and with the creative direction.

It's easy to succeed when you have a talent like Nicolas Ghesquiere at the helm of the womenswear and the commercial strengths of both Kim Jones and Virgil respectively.

Sabato has half the talent of any of these aforementioned designers and is responsible for double the workload. Heck even his former "boss" Pierpaolo Piccioli couldn't turn Valentino into multi billion dollar brand and he was immensely talented and experienced. Make it make sense!

 

[yslforever]

I have never seen Kering so nervous right now, they are exploring ALL options across ALL brands, including selling the brands.

 

[Olaffo]

^ Wouldn't be surprised, post-pandemic reality + lack of basic managerial skills are obviously a wake up call for the entire conglomerate. I think Mr. Arnault can literally play tennis all day long and he will still win. There is no competition on the horizon from Kering to anyone anywhere at all. With regards to selling brands I suppose they mean the little ones ? I can't imagine him selling McQueen etc.

 

[yslforever]

^ Wouldn't be surprised, post-pandemic reality + lack of basic managerial skills are obviously a wake up call for the entire conglomerate. I think Mr. Arnault can literally play tennis all day long and he will still win. There is no competition on the horizon from Kering to anyone anywhere at all. With regards to selling brands I suppose they mean the little ones ? I can't imagine him selling McQueen etc.

TBF, they are exploring all sales options on all brands, individually or as a portfolio of brands.
It’s a decision of the father BTW, not the son, and he’s leading the process.
Ofc, the creative positions and directions are deemed «secondary », I quote, meaning no one, absolutely no one, their most seasoned CDs or their newest ones, are safe from the axe if it could help.
The irony is that they are all tiptoeing and quoting «adverse market conditions » but they all know why they are in this situation.

 

[Olaffo]

TBF, they are exploring all sales options on all brands, individually or as a portfolio of brands.
It’s a decision of the father BTW, not the son, and he’s leading the process.
Ofc, the creative positions and directions are deemed «secondary », I quote, meaning no one, absolutely no one, their most seasoned CDs or their newest ones, are safe from the axe if it could help.
The irony is that they are all tiptoeing and quoting «adverse market conditions » but they all know why they are in this situation.

It is interesting to learn that state, literally, of Kering...

As much as I'm trying to understand their situation the lack of access to the data is making me thing that either the conglomerate is in serious troubles much more they are willing to admit or they are just repositioning themselves and planning projects for 20-20 years ahead aka moving to entertainment industry etc. Let's not forget Kering started as a timber company. With regards to "market conditions": there are always "market conditions", either you will adapt or someone else do it instead. If the heads will roll I want Demna to finally go, we are all sick and tired about Balenciaga which, despite of budget, marketing and so on, is no longer relevant and I don't think he can change that.

 

[yslforever]

It is interesting to learn that state, literally, of Kering...

As much as I'm trying to understand their situation the lack of access to the data is making me thing that either the conglomerate is in serious troubles much more they are willing to admit or they are just repositioning themselves and planning projects for 20-20 years ahead aka moving to entertainment industry etc. Let's not forget Kering started as a timber company. With regards to "market conditions": there are always "market conditions", either you will adapt or someone else do it instead. If the heads will roll I want Demna to finally go, we are all sick and tired about Balenciaga which, despite of budget, marketing and so on, is no longer relevant and I don't think he can change that.

The son quite enjoy the luxury/fashion business, living in LA, the father wants a full repositioning, getting out of luxury like they got out of timber or retail (Printemps, La Redoute), but is not convinced by the entertainment business the son wants to pursue.
The father wants to cash out before the conglomerate makes loss...

 

[Olaffo]

I don’t want to be rude but the Pianult senior needs to hurry up bc he is 87 and cashing out takes some time…

 

[Nimsay]

How do you get out of something that comprises 95% of your conglomerate?

YSL films isnt making billions Im so confused. Realistically even after buying the CAA they will be struggling to produce smash content. Smash content just doesnt come around often like Tom Ford doesnt come around often. It seems like theyre jumping from the frying pan to the fire. The possible losses in entertainment are much bigger than luxury

 

[yslforever]

Confirmed: all Kering brands are offered in the bank's data rooms for potential buyers to browse and select. Actually the bank has set up one data room per brand.

 

[velvetandsilk]

How do you get out of something that comprises 95% of your conglomerate?

YSL films isnt making billions Im so confused. Realistically even after buying the CAA they will be struggling to produce smash content. Smash content just doesnt come around often like Tom Ford doesnt come around often. It seems like theyre jumping from the frying pan to the fire. The possible losses in entertainment are much bigger than luxury

Whispering from the wife who benefits from it and ignorance. The entertainment industry is not easy from one reason - political censorship, for example in the China exists a limit to the films that can be shown from the western world. The bosses of the largest Hollywood studios have a meeting every year to determine how they will divide the market, and then the scripts must be sent to the appropriate authorities for inspection. There's also the matter of the egos of actors and directors, who can argue over stupid things and the film may be interrupted and never made, and you'll lose money.

 

[LadyJunon]

Confirmed: all Kering brands are offered in the bank's data rooms for potential buyers to browse and select. Actually the bank has set up one data room per brand.

So, it's really the end of Kering. All of Ford and De Sole's work was for nothing. One thing I'm wondering about is the future of the brands:

Gucci makes around €10bn in revenue and I'm assuming that a full acquisition would be around €20-30bn (a very modest estimate). That number is too big of an immediate purchase for most companies and I don't see LVMH looking to buy a brand that could cannibalise their cash-cow. Gucci's near future will probably be similar to Burberry's situation, a standalone brand split between several shareholders.

Saint Laurent and Bottega Veneta will probably be bought by a larger luxury group. Saint Laurent has insane cultural value and Bottega is equipped with a background in leather expertise. I wouldn't be surprised if LVMH or Richemont does a dual purchase. LVMH could use them to replace some of their weaker brands (Givenchy, Marc Jacobs, Berluti, Patou, Kenzo, Pucci), while Richemont could use them to build a much stronger business foundation in soft luxury.

Balenciaga has a equal possibility of being sold to a larger group or a smaller group/entrepreneur like Schiaparelli or Vionnet. Outside of the industry and fashion historians, the brand doesn't have a super strong cultural value with the general public knowing it as the meme brand. McQueen and Brioni will probably be sold a to smaller group/entrepreneur or will be lost to the sands of time, while Valentino will probably be bought back by Mayhoola.

TL,DR: The brands that are big, but not monolithic, will probably be fine. The brands on either extremes will have less predictable futures.

How do you get out of something that comprises 95% of your conglomerate?

YSL films isnt making billions Im so confused. Realistically even after buying the CAA they will be struggling to produce smash content. Smash content just doesnt come around often like Tom Ford doesnt come around often. It seems like theyre jumping from the frying pan to the fire. The possible losses in entertainment are much bigger than luxury

Let's be honest, once Pinault sells all of these brands and leaves the luxury, he'll be mostly dead to us. He'll still own Giambattista Valli and Courrèges, but they exist outside of Kering and he seems to much less involved in those brands.

 

[justpassingthrough]

Confirmed: all Kering brands are offered in the bank's data rooms for potential buyers to browse and select. Actually the bank has set up one data room per brand.

Source???

 

[yslforever]

Source???

People from the M&A bank, people from the law firm, secretaries, n-2s and n-1s at Kering's.