Kering Says Investments May Hit Margins as Gucci Sales Decline

(FILES) A photo taken on June 18, 2013 shows the new name and logo of French luxury and retail group PPR , Kering. (Photo by FRANCOIS GUILLOT / AFP)

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08:17-8 February 2024 AD ـ 29 Rajab 1445 AH

Asharq Al Awsat

08:17-8 February 2024 AD ـ 29 Rajab 1445 AH

Kering Says Investments May Hit Margins as Gucci Sales Decline

(FILES) A photo taken on June 18, 2013 shows the new name and logo of French luxury and retail group PPR , Kering. (Photo by FRANCOIS GUILLOT / AFP)

Kering posted a 4% decline in fourth quarter sales, hit by slowing demand for fashion as it seeks to turn around its top brand Gucci, and cautioned that investments in its labels could affect margins in 2024.
Sales at the French group, which also owns fashion brands Bottega Veneta and Balenciaga and jeweler Boucheron, fell to 4.97 billion euros ($5.36 billion) in the final three months of the year, despite improvement in the United States and Europe. That was broadly in line with expectations for 4.94 billion euros, according to consensus estimates cited by RBC.
After a post-pandemic splurge that fueled stellar sales growth for high end fashion companies over two years, consumers have been reining back purchases, particularly younger, less wealthy clientele that are more vulnerable to rising inflation.
"We will continue to invest in our brands in the long term -- yes, that means in the coming year our margins will be less supported than in previous years," Kering chief financial officer Armelle Poulou told reporters, according to Reuters.
"We think it’s the good strategy to ensure growth in the long term for our brands," she added.
Kering’s efforts to revive sales at its star label Gucci, which has lagged rivals over the past two years, have been complicated by the slowing demand.
Barclays' analysts project industry-wide growth from high end luxury companies of 5% this year, down from 9% last year and double digit growth the previous two years.
Gucci's performance improved over the fourth quarter, down 4% year-on-year, compared with a 7% decline in the third quarter. The label's recurring operating margin stood at 33.1% for the full year, lower than its level of 35.3% in the first half.
"Gucci is not performing worse than expected which is a relief," said Piral Dadhania, analyst with RBC, noting that the focus would now turn to Gucci's margin outlook.

Gap Climbs After Leadership Change at Old Navy, Profit Forecast Raise

A person shops at a Gap store in Times Square in New York City, US, November 28, 2024. (Reuters)

16:37-28 August 2026 AD ـ 15 Rabi’ Al-Awwal 1448 AH

Gap Climbs After Leadership Change at Old Navy, Profit Forecast Raise

A person shops at a Gap store in Times Square in New York City, US, November 28, 2024. (Reuters)

Gap's shares jumped as much as 24.1% to a four-month high, after the apparel retailer named industry veteran Michael Francis as CEO of Old Navy, a move aimed at reinvigorating the brand in a challenging spending environment.

Old Navy, Gap's biggest brand, has struggled to gain traction in select women's apparel categories in recent quarters, a key hurdle in the company's turnaround.

Since CEO Richard Dickson took charge in 2023, Gap has revamped its leadership and ‌marketing, boosting Gap ‌and Banana Republic, but Old Navy continues ‌to ⁠lag.

"It is true ⁠that the family demographic that Old Navy serves is under pressure, but Old Navy did not give them enough reasons to buy," said Neil Saunders, managing director of GlobalData, adding that the weakness points to a broader problem that Gap can no longer pass off as a "modest range misstep".

Gap shares were trading 15% ⁠higher at $23.95, and could add about $1.14 billion to ‌the company's market value if gains ‌hold.

Some retailers are bringing new leaders on board to revive their ‌struggling brands. Tapestry's Kate Spade last month appointed renowned designer Jonathan ‌Saunders as executive creative director.

"The appointment of a new Old Navy leader underscores management's focus on stabilizing performance at the company's largest banner," Jefferies analysts said in a note.

Francis joined Gap in March as Old ‌Navy's chief customer officer. He brings over four decades of marketing, commercial and business transformation experience, ⁠including roles ⁠at Target and Walmart.

Gap lifted its annual profit forecast after topping quarterly estimates. However, it narrowed its fiscal 2026 sales growth target, citing economic uncertainty.

Its quarterly comparable sales grew about 10%, while at Old Navy they were down 4%, the first decline in 12 quarters.

The company's forward 12-month price-to-earnings ratio stood at 8.33, compared with American Eagle Outfitters' 8.94 and Urban Outfitters' 11.93.

"Gap should be able to end the full fiscal year on a positive sales note, but it needs to get the big engine of Old Navy whirring again to keep advancing at a convincing pace," Saunders said.

Fashion

M&S Rolls Out Zalando Fulfillment Deal in 22 European Markets

A shopper carries a Marks & Spencer shopping bag in London, Britain, January 2, 2025. (Reuters)

10:36-25 August 2026 AD ـ 12 Rabi’ Al-Awwal 1448 AH

M&S Rolls Out Zalando Fulfillment Deal in 22 European Markets

A shopper carries a Marks & Spencer shopping bag in London, Britain, January 2, 2025. (Reuters)

Britain's Marks & Spencer has expanded its partnership with Germany's Zalando, enabling the online fashion retailer to fulfill M&S' direct-to-consumer orders across 22 continental European markets, it said on Tuesday.

M&S said the partnership ‌would help ‌scale its European online ‌business ⁠through faster deliveries ⁠and returns, while reducing logistics costs by up to half.

The partnership was announced in November last year ⁠and successfully trialed in ‌Poland ‌this month.

Partnership now expanded ‌across Europe, including M&S' largest ‌online markets of France, the Netherlands, Germany and Spain.

M&S said it is ‌continuing to see momentum in its international online ⁠business, ⁠driven by growing demand for its fashion offer.

In May, M&S forecast a return to profit growth this year after it slumped 24% in 2025/26, hit by a cyberattack that dented sales and margins.

Fashion

Shein Grapples with EU Backlash, But Clients Keep Coming

FILE PHOTO: Packs of clothing are displayed at a garment factory for Shein in Panyu District, Guangzhou, Guangdong province, China, July 27, 2026. REUTERS/Go Nakamura/File Photo

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06:01-24 August 2026 AD ـ 11 Rabi’ Al-Awwal 1448 AH

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06:01-24 August 2026 AD ـ 11 Rabi’ Al-Awwal 1448 AH

Shein Grapples with EU Backlash, But Clients Keep Coming

FILE PHOTO: Packs of clothing are displayed at a garment factory for Shein in Panyu District, Guangzhou, Guangdong province, China, July 27, 2026. REUTERS/Go Nakamura/File Photo

Shein's meteoric growth has made it a lightning rod for critics of ultrafast fashion in Europe, where officials are trying to rein in its operations in the name of social and environmental responsibility.

The probes, financial penalties and fierce debates have dampened but not fully curbed the enthusiasm of millions of clients in a key market for the China-founded online juggernaut.

The company's $1.7 billion stock market listing, announced on Monday, aims in particular to juice its international expansion, AFP said.

- Short-lived Paris store -

Starting in 2012, Shein began online sales of its continually renewed stock of tops, dresses and other items, drastically undercutting the prices of its rivals -- to say nothing of traditional clothing stores.

Its European customer base rose to 156 million average monthly users by the end of last year, making Shein one of the continent's biggest e-commerce platforms alongside China's AliExpress (193 million users), and Amazon (around 180 million).

In November, the group made waves with its first-ever physical outlet, a dedicated space in the storied BHV department store in Paris.

Hundreds of customers lined up on its opening day, and dozens more people gathered to protest, requiring a heavy police presence to keep the tense situation from getting out of hand.

Demonstrators slammed what they called inhumane working conditions at Shein's suppliers, the environmental costs of selling clothes not made to last, and unfair competition against brick-and-mortar retailers struggling to stay open.

The company says it holds its suppliers to strict compliance standards and does not tolerate forced labor.

- Sex doll scandal -

It did not help that just a few days before the Paris opening, France's consumer protection agency said it had discovered childlike sex dolls for sale on Shein's platform.

Accusing the company of fostering child pornography, French officials asked the European Commission to open an inquiry under the bloc's wide-reaching Digital Services Act.

The EU investigation that opened in February 2026 targeted the sale of illicit goods "including child sexual abuse material" as well as what it alleged was Shein's "addictive design".

In June, French authorities imposed two fines on Shein totaling more than 22 million euros ($25 million), citing problems with product traceability, environmental labelling and delivery times.

The next month it secured an EU-wide halt on the sales of items with crocodile logos -- deemed a counterfeit of France's famed Lacoste brand of polo shirts.

Overall, Shein has paid over 210 million euros in various French fines over the years, and Italy has also imposed fines alleging misleading environmental claims.

In June, the BHV's new owners said they would part ways with Shein, calling the decision to welcome a physical outlet a "strategic error".

- Regulatory pushback -

Shein has called the penalties "disproportionate and discriminatory", while China's commerce ministry says they violate World Trade Organization rules.

That did not stop the European Union from imposing duties on the billions of small, inexpensive retail parcels entering the bloc each year -- most of them from Chinese e-commerce sites.

Since July, a duty of three euros per item applies to packages valued at less than 150 euros, similar to a move last year by US President Donald Trump's administration against products originating in China.

But the EU fee applies to the type of item imported, not the number. So a person buying five T-shirts pays just three euros, but someone buying a T-shirt, jeans and socks would pay nine euros.

Brussels says the duty helps compensate for overwhelmed customs authorities given the popularity of e-commerce, in particular for clothes and other items from China and elsewhere that do not comply with EU standards.

According to the head of the European Parliament's trade committee, Bernd Lange, the number of small parcels from abroad have more than quadrupled to 5.88 billion since 2022.

Starting in November, the EU will impose a still-undetermined handling fee on such parcels.

It is far from clear how effective the duties will be, especially as online giants like Shein could build warehouses in Europe to limit the impact.

After France imposed its own duty of two euros on such parcels this year -- before the EU system kicked in -- the customs office estimated it brought in around 2.3 million euros per month.

That was far below the 33 million euros per month the government had expected in the 2026 budget.

Kering Says Investments May Hit Margins as Gucci Sales Decline

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