Investing.com — As 2025 approaches, the question of whether Gucci will regain its leadership position in the luxury sector arises.
UBS analysts are skeptical of the outlook, citing a difficult market environment and ongoing problems at its parent company, Dry (EPA:).
Gucci, which accounts for about 70% of Kering's EBIT, has faced challenges over the past five years, including declining sales and profitability.
Despite management's efforts to revitalize the brand, the outlook for 2025 suggests that it may not yet be Gucci's time to shine.
The brand is expected to see a slight sales contraction of 1% in 2025. Although retail sales are expected to remain stable, the decline in wholesale volumes reflects a broader trend of moderate momentum.
Gucci's EBIT margin is expected to decline to 19%, a slight decline from the previous year.
The contraction underscores the high costs associated with strategic initiatives, including those led by its new creative director, Sabato de Sarno.
UBS analysts note that while these measures are essential to the long-term improvement of the brand, they are unlikely to result in an immediate financial turnaround.
Adding to Gucci's challenges is the broader economic environment, which has proven less favorable to brands targeting aspirational consumers.
Sales of luxury goods in China, a critical market, are expected to remain weak, with a forecast decline of 3% in 2025.
On the other hand, the American market is showing signs of recovery, with growth estimated at 5%, but this rebound alone cannot compensate for Gucci's current difficulties.
Kering as a whole faces a daunting task: balancing brand investments with profitability. The group's sales are expected to grow by just 1% in 2025, while EBIT margins are expected to remain under pressure.
The company's efforts to stabilize its finances, including possible retail store closures and a focus on generating free cash flow, reflect a prudent strategy amid uncertainty.
Analysts also flagged risks that could further complicate Gucci's trajectory. These include the possibility of another change in creative direction and financial strains linked to Kering's other commitments, such as a €4 billion put option on Valentino.
These two factors could weigh heavily on the group's balance sheet and its ability to allocate resources efficiently.
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