Kering’s Gucci Faces Continued Decline Amid Market Optimism for Luxury Fashion Brands

The Kering Group reported another challenging quarter as sales at Gucci dropped by 14 percent in the third quarter of 2025, marking the brand’s seventh consecutive double-digit decline.

While overall group revenue decreased by 5 percent on a like-for-like basis, the results still surpassed analysts’ expectations, signaling the potential beginning of a long-term recalibration within one of the world’s most iconic Luxury Fashion Brands.

Kering’s revenue for the July–September period totaled €3.42 billion (USD 3.98 billion), compared to the 9.6 percent decline analysts predicted. The results, while modestly encouraging, underscore the magnitude of the transformation under CEO Luca de Meo, who was brought in to revive growth after two years of stagnation and structural challenges across Kering’s portfolio.

In his statement, de Meo acknowledged that “performance remains below market standards,” yet highlighted sequential improvement across most divisions. Analysts point to de Meo’s early focus on brand consolidation, cost optimization, and strategic divestments—such as the recent €4.7 billion sale of Kering Beauté to L’Oréal—as an indication that the group is prioritizing liquidity and long-term stability over short-term headline growth.

A Shifting Luxury Landscape

The results at Gucci mirror broader volatility within the luxury fashion sector. According to the 2025 Bain & Company and Altagamma report, global personal luxury goods sales are projected to grow by only 2 to 3 percent this year, compared to double-digit surges seen during the post-pandemic rebound. However, the long-term outlook remains positive: the luxury market is expected to exceed €530 billion by 2030, driven largely by the Ultra High Net Worth Individual (UHNWI) segment and the rise of younger affluent consumers in Asia and the Middle East.

There are now over 430,000 UHNWIs globally, a number expected to increase by 5–7 percent annually, with Asia’s share growing fastest. These elite consumers, responsible for more than 40 percent of total luxury expenditure, are increasingly gravitating toward heritage, craftsmanship, and exclusivity—values that remain central to Gucci’s DNA but may require strategic redefinition in today’s cultural context.

De Meo’s challenge, therefore, lies not in reinventing Gucci’s identity, but in recontextualizing it for the new elite: a generation of global connoisseurs who prioritize personal expression, sustainability, and timeless investment pieces over trend-driven fashion.

Internal Rebalancing Across Kering’s Houses

While Gucci continues to dominate Kering’s revenue share, the group’s smaller houses—Saint Laurent and Bottega Veneta—posted stronger-than-expected results this quarter, providing a degree of balance within the portfolio. Both brands benefited from a sharpened creative focus, strong performance in leather goods, and sustained demand from mature markets like the United States and Western Europe.

This diversification has proven essential as Kering navigates the global slowdown in aspirational luxury spending. As mid-tier consumers retreat, the top 1 percent remain steadfast in their consumption patterns, driven by resilient wealth creation, especially in markets such as the United States, the Gulf, and Mainland China.

In China, where performance “remained negative but showed substantial sequential improvement,” according to CFO Armelle Poulou, signs of stabilization are emerging. This echoes positive sentiment from peers such as LVMH and Hermès, both of which reported encouraging recovery trends in the region.

Betting on a Long-Term Renaissance

Despite current turbulence, market optimism around Kering remains high. The company’s shares have surged 85 percent since June, far outperforming the STOXX Europe Luxury 10’s 12 percent rise over the same period. Investors appear confident in de Meo’s strategic direction, which prioritizes operational discipline and long-term brand equity over reactive expansion.

Analysts also anticipate that Gucci’s revival will hinge on a renewed creative vision, possibly tied to evolving luxury values that appeal to the global elite rather than mass aspirational buyers. Recent internal signals—ranging from potential shifts in retail strategy to more exclusive clienteling experiences—suggest that Gucci is recalibrating toward a model of fewer, richer, and more meaningful transactions.

In this new paradigm, the goal is not to outpace competitors in volume but to reaffirm Gucci’s symbolic power among the world’s wealthiest consumers. For the 1%, Gucci remains more than a fashion statement—it is an emblem of cultural capital, status continuity, and aesthetic investment.

Outlook

Kering’s current trajectory embodies the transition facing many Luxury Fashion Brands today: a movement from mass desirability toward ultra-curated exclusivity. While the road to recovery for Gucci may extend beyond 2025, the strategic groundwork under Luca de Meo reflects a disciplined shift toward long-term sustainability, operational focus, and alignment with the new global elite’s expectations.

As the luxury sector redefines its growth formula around experience, identity, and legacy, Kering’s next chapter may prove to be less about crisis management and more about quiet reinvention—a return to essence for one of the world’s most storied fashion houses.