Luxury fashion may portray an image of glamor and exclusivity, but not all that glitters is gold.
Behind the more than five-figure price tags and highly coveted brand names, the industry has struggled with declining sales and cautious consumer spending amid ongoing economic uncertainty.
Founded in 1963, Kering is the French multinational luxury goods group behind some of the most recognizable high-end houses, including Gucci, Saint Laurent, Bottega Veneta, Balenciaga, and Alexander McQueen.
Despite being the world’s second-largest luxury group, with revenue of €14.7 billion ($17.38 billion) in 2025, Kering has faced mounting pressure in recent years. Leadership changes, shifting consumer preferences, and broader industry headwinds have challenged its performance.
Now, the company is preparing to embark on a major transformation that will reshape its entire business.
Kering is closing hundreds of stores worldwide
Kering (PPRUY) shuttered 133 stores across its brands in 2025, representing a net reduction of 75 units, and bringing its total store count to 1,719 as of December 31. The company said during an earnings call that the closures targeted underperforming locations that no longer aligned with its strategy to increase sales and elevate brand positioning.
An additional 100 store closures are already scheduled worldwide, with further reductions under review. Gucci is expected to account for the largest share of those cuts.
2025 store closures
- Western Europe: 13
- North America: 11
- Japan: 16
- Asia-Pacific: 42
Source: Kering
Kering said this move aimed to reinforce its operational discipline while protecting its brand, delivering a higher-quality retail footprint.
The company also reduced its inventory by 8% in 2025 and plans to trim it further in 2026 to lower costs and better meet consumer demand.
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Kering’s financial pressures mount
The closures come amid Kering’s declining financial performance.
For the full year of 2025, total revenues fell 13% year over year and 10% on a comparable basis. Gucci, the group’s largest and most influential brand, suffered the biggest decrease, with revenue down 22% and 19% on a comparable basis, according to its latest earnings report.
“These results are not where we want to be, but they mark the bottom and the first steps of the turnaround we have initiated,” said Kering Senior Analyst Luca Solca in the earnings call.
Kering’s new strategy to return to growth
To reignite growth, Kering plans to reduce its dependence on fashion while expanding into other high-potential luxury categories.
“This discipline is precisely what provides a healthy financial foundation to fund our comeback,” said Kering CFO Armelle Poulou in the earnings call. “To support our brands, we continue to invest selectively in key areas while maintaining strict cost control in others.”
Beauty joint venture
In October 2025, Kering agreed to sell its beauty division to L’Oréal for $4.7 billion, granting it a 50-year exclusive licensing agreement, expected to take effect in the first half of 2026, according to a company press release.
Both companies are also forming a joint venture focused on luxury, wellness, and longevity, aiming to accelerate innovation in fragrance and cosmetics for its major luxury Houses, a space they view as high-growth and high-value in the long term.
“This partnership allows us to focus on what defines us best: the creative power and desirability of our Houses,” said Kering CEO Luca de Meo in the press release.
Jewelry expansion
Beyond beauty, Kering sees jewelry as a resilient and underdeveloped opportunity within its portfolio. Though currently a small contributor to the group’s revenue, the category has withstood the broader luxury downturn better than fashion.
To strengthen its capabilities, Kering acquired Raselli Farco at the end of last year and plans to continue investing in this sector. The company will share its full jewelry strategy in more detail at Capital Markets Day in April.
Creativity and execution
Kering’s leadership team repeatedly emphasized creativity as the foundation of the turnaround.
“Creativity is our North Star,” said Solca in the earnings call. “It is what sets luxury apart. But creativity only becomes value when execution follows at the same pace: in retail, in supply chain, in merchandising, in marketing. This is where we are putting our energy into.”
Solca added that, on the ground, Kering’s products are reconnecting with consumers. The company saw sales improvements in the second half of 2025, suggesting early signs of stabilization.
“The momentum is real: early, fragile, but real. And I can guarantee you that we will build on it,” said Solca.
Broader retail industry headwinds persist in fashion
Kering is not the only company struggling; fashion has been navigating a persistent slump over the past few years.
McKinsey & Company’s State of Fashion 2026 Report projects low-single-digit growth for the global fashion industry in 2026. Macroeconomic volatility and tariff pressures are expected to continue shaping value-conscious consumer behavior, particularly in the U.S., where consumer sentiment remained low throughout 2025.
“In the end, 2026 will likely be another year of dislocation for fashion companies,” said McKinsey & Company Fashion Retail Analysts.
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Most recently, luxury retailer Saks Global also disclosed plans to close an additional nine stores following the shutdown of hundreds of locations and its Chapter 11 bankruptcy filing.
LVMH (LVMUY), the world’s largest luxury goods conglomerate, also faced headwinds, with revenues declining 5% for the full year of 2025.
The rise of e-commerce in retail
Meanwhile, e-commerce continues expanding its share of consumer spending.
With 84.3% of Americans shopping online, U.S. e-commerce spending reached $1.34 trillion in 2024 and is projected to surpass $2.5 trillion in 2030, according to Capital One Shopping.
Still, physical stores remain the dominant preferred format for most consumers, accounting for around $14.4 trillion of total retail sales of $18.9 trillion in 2025, according to Euromonitor research gathered by EY.
“It’s clear that the physical store still plays an important role,” said EY Retail Analysts Malin Andrée and Jon Copestake. “Not only do stores have plenty of runway left in delivering revenue, but they also have opportunities to drive new growth and alternative revenue streams and, by working in tandem with digital channels, they can maximize returns on investment.”
What analysts are saying about Kering
Despite its turnaround efforts, Kering’s shares have dropped 9.25% year to date as of February 17. The stock currently carries a consensus “hold” rating from Wall Street analysts tracked by MarketBeat.
Recently, the company underwent significant leadership changes. In September 2025, Luca de Meo replaced longtime CEO François-Henri Pinault, and creative director roles at its top three fashion houses, including Gucci, Saint Laurent, and Bottega Veneta, have also shifted.
“Kering has changed designers across its three main brands simultaneously, a risky move given the group’s reliance on figures like [Deputy CEO] Francesca Bellettini, who holds significant sway over appointments and brand direction,” said Third Bridge Luxury Apparel Analyst Yanmei Tang to Fashion Dive.
“This top-heavy approach often leads to reactive, short-term decisions aimed at plugging immediate gaps.”
Gucci is Kering’s largest brand, accounting for 45% of its total revenue. For years, the company has relied on its performance, leaving it vulnerable to fluctuations.
In 2025 alone, Kering appointed Francesca Bellettini as the new Gucci CEO in September, and Demna took over as the creative director in July.
“Creative transitions take time, and the retail environment has not been supportive,” said Carrara Advisory Industry experts. “Consumer sentiment in China weakened. U.S. aspirational buyers pulled back. European tourism shifted. This confluence of factors placed Gucci in a vulnerable position.”
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