Discussion: The State of Kering

[LadyJunon]

The incoming fate of Bottega Veneta and the current state of Kering:

Despite murmurs otherwise in the Kering offices, I’m told that Blazy’s resignation was definitive… and unexpected. All this would have been highly secretive. Typically, as part of the recruitment process, a prospective designer auditions for months. If Blazy did that, he would have had to make the time and mental space for that creative work on top of designing his most-praised collection to date at Bottega Veneta. (Remember, Simon Porte Jacquemus was said to have hired a team of something like eight people to work on his presentation for the job.)

This would all require an incredible amount of discretion and discipline, which the Wertheimers clearly value. As for whether Kering tempted him to stay, it appears that they probably had no choice but to let him go. There’s a lot of hullabaloo around non-competes in the fashion business, but the reality is that, in Italy, they can be bought out. It would have been more productive to simply wish Blazy the best and find a replacement.

I’m told that several names were bandied about as Kering began interviewing successors—including Jacquemus (poor guy can’t stay out of a creative director conversation) and Miu Miu’s Dario Vitale. However, I’m also told that the leading candidate, and likely appointee, is Louise Trotter, the current designer of Carven. Trotter, who previously worked at Lacoste and Joseph, collaborates closely with the stylist Suzanne Koller, and the Frankie Shop-meets-Old Céline aesthetic of Carven is their mind meld. She’s a grown-up commercial designer and can certainly handle managing a big team. But can she inspire the way Blazy did?

At Bottega Veneta, executives are already feeling melancholy about Blazy’s exit. After all, he is talented and professional, and designs things people want to buy. Bottega is also the only major Kering business that is growing at the moment. Alas, while the conversation over the next few weeks will be focused on Blazy’s exit and Trotter’s prospects, Bellettini and her team face other challenges, too. At Saint Laurent, new C.E.O. Cédric Charbit and creative director Anthony Vaccerello are grappling with the slowdown of that business—an inevitability with any longtime designer (what goes up must come down) but one that needs to be managed.

However, it’s the performance of Gucci, the group’s profit center, that determines how the entire thing runs. There is a hurry-up-and-wait feeling to the Gucci situation that will only be resolved by either a tremendous uptick in sales or a creative change, despite the green shoots as accessories ramp up and fresh ready-to-wear arrives in the stores. The business is significantly smaller than it was two years ago, and while everyone is sort of sick of talking about whether Sabato De Sarno will stay or go, they can’t stop talking about it, either. This is a case where money will fix everything.

Pulled from a recent Puck News article (thanks @PDFSD!)

 

[yslforever]

The incoming fate of Bottega Veneta and the current state of Kering:

Pulled from a recent Puck News article (thanks @PDFSD!)

Thanks
Very informative, but I doubt Blazy's departure is unexpected; every contract has a notice period of minimum 3 months before the renewal date.

 

[fenty]

Got my funeral attire ready, time to lay Kering to rest !

 

[justpassingthrough]

PARIS — Kering said Monday it is in talks with Italian tax authorities over a tax probe focused on its Alexander McQueen brand.

“Kering confirms that discussions are underway with Italian tax authorities regarding Alexander McQueen,” the French luxury group said in a statement, confirming a Reuters report.

“The company and the Kering group are confident about the correctness of their operating mode and are pursuing these discussions in a spirit of constructive dialogue,” it added.

Reuters quoted unnamed sources as saying that prosecutors in Florence have opened an investigation for omitted tax declarations after Italy’s financial police alleged that Alexander McQueen failed to declare between 60 million euros and 70 million euros in taxable income between 2016 and 2022.

In 2019, the conglomerate paid the Italian Revenue Agency a total sum of 1.25 billion euros to settle an investigation into its tax payments related to the sales in Italy of Gucci products between 2011 and 2017.

The investigations identified an alleged tax evasion of 1.4 billion euros. According to the Italian tax authorities, in distributing Gucci products in Italy through a directly operated Switzerland-based subsidiary named Luxury Goods International, Kering had intentionally avoided the payment of taxes in Italy.

In 2022, it settled another tax dispute, this time pertaining to Bottega Veneta, through the payment of 186.7 million euros to the Italian Revenue Agency.

Another hefty tax bill would come at a sensitive time for Kering, which has extended its arsenal of cost-cutting measures to counter an expected 50 percent drop in operating profit this year. Layoffs, store closures and contract renegotiations are all on the menu as the group seeks to right its ship after a tougher-than-expected third quarter.

Yahoo Finance:
Kering Confirms Talks With Italian Tax Authorities Over Alexander McQueen Probe

Thanks @PDFSD for bringing this to my attention!

 

[GivenchyHomme]

This is getting good.

 

[Nimsay]

Clownery at all levels.

 

[Olaffo]

Update: worst than yesterday (when they did let go of the only one profitable designer) 🥴

 

[proseccotabis]

Mass Exodus coming for Kering

to a point where they froze hiring.....

 

[fenty]

to a point where they froze hiring.....

 

[Nimsay]

One can hardly muster sympathy for Kering.

Indeed, their reluctance to dismiss Demna following that most unsavory controversy appears to have sealed their fate.

The dissolution of these luxury conglomerates seems like a must rather than a maybe. Let these maisons find their independence through whatever means necessary. How delightful it would be to see them acquired by ambitious nouveaux riches seeking their entrée into haute couture....rather than falling into the portfolios of LVMH or Richemont.

 

[LadyJunon]

One can hardly muster sympathy for Kering.

Indeed, their reluctance to dismiss Demna following that most unsavory controversy appears to have sealed their fate.

The dissolution of these luxury conglomerates seems like a must rather than a maybe. Let these maisons find their independence through whatever means necessary. How delightful it would be to see them acquired by ambitious nouveaux riches seeking their entrée into haute couture....rather than falling into the portfolios of LVMH or Richemont.

To be honest, I wouldn't be suprised if that ends up being the future of luxury. If the downturn continues throughout the decade, I can see Kering dissolving entirely and the likes of LVMH and Richemont whittling down their portfolios by a lot. The largest of the brands will probably go to clueless, but ambitious tech-bros, while the rest fall into the hands of beauty companies and wealthy entrepreneurs. That said, I'm sure that Arnault would do everything in his power to keep Dior in his hands (probably to the point of selling Louis Vuitton).

 

[yslforever]

I bet they won't be able to absorb Valentino in 2028 without bleeding massive cash and straining their finances even more; Mayhoola has certainly put a reevaluation clause for the remaining 70% and if AM's Valentino generate even a light uptick in sales, they are cooked.
Could not happen to nicer persons.

 

[JohannesL]

It will be ironic if Kerring fails to recover and has to sell its portfolio in the future and the Qatatri absorb some brands to form another conglomerate.

 

[Nimsay]

The Qataris' investment ethos, rooted in a desire to amass cultural and economic icons, makes them likely candidates... Their wealth affords them the freedom to prioritize prestige and long-term influence over the immediate profitability that Kering must consider.

We need Qatari owned Balenciaga with John Galliano backed by the entire Qatari wealth fund.

 

[JohannesL]

I think the Qatari has their ways of managing brands that are very different from those like LVMH and Kering. Balmain with Olivier R and Valentino with Maria Grazia(left for dior) and Pierpaolo(out after Kering has its hand in it) all stayed with the brands for a long time unlike those CD shuffles everywhere. It will be the ultimate dream if the Qarari has Balenciaga for Galliano (they are both great couturier of their own time)and John would probably stay with the brand as long as like Karl with Chanel.

 

[Abracai]

I bet they won't be able to absorb Valentino in 2028 without bleeding massive cash and straining their finances even more; Mayhoola has certainly put a reevaluation clause for the remaining 70% and if AM's Valentino generate even a light uptick in sales, they are cooked.
Could not happen to nicer persons.

They have the options to buy Valentino, they're not obliged to do it.

Like every analyst I expect sales growth to resume in 2025 for all the industry including Kering and Gucci as well.

If China consumers stimulus will be at play by 2028 Kering will have huge operating leverage at full speed hence expanding margins again.

Their balance sheet has worsened (and the same happened to 90% of luxury companies) but still is better than 70% of public companies. They also will soon reduce debt by at least 4 billions refinancing real estate investments with new partners.

I know this is a Kering haters forum but this is just to put things in the right context. They keep growing their net equity year after year and still they produce almost 1.5 billions of net income with significant margins in one of the worst year for the whole industry.

SPOILER: One of the four biggest banks in the US has created a 5% stake in the company during 2024 (after contributing to downgrade the stock multiple times). So in 2025 a new narrative on the company will probably be deployed as soon as revenue will resume growth (very soft comp base next year)

 

[JohannesL]

I don’t think the majority of members here hate Kering as much as Americans hate their health insurance industry even most of us don’t like Kering’s choices of CDs. As someone who has little to do with those conglomerates, LVMH, Richmont and Kering really don’t make any difference to me when it comes to expressing opinions, but there might be a small amount of people working for the industry beg to differ with their partialty.

 

[yslforever]

They have the options to buy Valentino, they're not obliged to do it.

Like every analyst I expect sales growth to resume in 2025 for all the industry including Kering and Gucci as well.

If China consumers stimulus will be at play by 2028 Kering will have huge operating leverage at full speed hence expanding margins again.

Their balance sheet has worsened (and the same happened to 90% of luxury companies) but still is better than 70% of public companies. They also will soon reduce debt by at least 4 billions refinancing real estate investments with new partners.

I know this is a Kering haters forum but this is just to put things in the right context. They keep growing their net equity year after year and still they produce almost 1.5 billions of net income with significant margins in one of the worst year for the whole industry.

SPOILER: One of the four biggest banks in the US has created a 5% stake in the company during 2024 (after contributing to downgrade the stock multiple times). So in 2025 a new narrative on the company will probably be deployed as soon as revenue will resume growth (very soft comp base next year)

I don't think we are Kering haters; they just made all the worst artistic moves (firing Tom, Nicolas, Hedi, Alessandro, Stefano, etc, letting Sarah and Matthieu leave), and keep producing mediocre (Demna and Ancora) or semi-good (Anthony) fashion with an extremely short-term vision. They have no talent strategy at all.
They also made very questionnable business moves: over-priced real estate purchases, Creed, not buying back YSL beauty).
They never invested in a brand building, were never able to build Gucci Beauty in 20 years.
Their only noticeable success is Kering Eyewear.

And we have NO details on the Valentino deal, it's already vastly overpriced (Valentino is not even half of the revenue of YSL) and we have no details of the commitments of Kering towards Mayhoola. They may have an option but none of Mayhoola options are mentionned either.

A slight uptick of the market is forecasted for 2025-2026, fine, but there are not indication Kering brands will gain market shares in this possible uptick.

Kering can't be compared to all publicly traded companies because they are part of a unique sector, in which companies can only compared to each others.

And the spoiler than a big US bank has bought 5% is not even indicative, because 1) it comes from an US bank (not the most reliable banking system in the world) and 2) the stock is dirt cheap and there is indeed a possibility of a quick 15%-25% gain in a couple years.

But Kering is indeed a badly runned company.