Kering, a leading conglomerate in the luxury industry, is moving forward with plans to bring in external investors for a new entity that will manage approximately €4 billion ($4.2 billion) worth of real estate assets spread across Milan, New York, and Paris. According to a Bloomberg report on December 18, the project is expected to be completed as early as early 2025.
This initiative is part of Kering’s strategy to strengthen its financial foundation and reduce its debt load. In recent years, the company has been actively acquiring properties in key cities. In 2023, Kering purchased properties in New York for approximately $1 billion and in Milan for €1.3 billion. Additionally, it acquired prime real estate on Paris’s renowned Rue de Castiglione and Avenue Montaigne.
A company spokesperson commented, “Kering is considering refinancing a part of its prime real estate properties by welcoming a third-party investor in a dedicated vehicle. The group is making good progress in that direction and does not envision other options such as a spin-off or an IPO.” However, the Italian daily newspaper, Il Sole 24 Ore reported that Kering might be considering an IPO for the newly established real estate company.
Struggles of Key Brands and Hopes for Financial Improvement
Kering has reported a significant decline in revenue and profit for the first half of 2024 (January–June), impacted by sluggish sales of its flagship brand, Gucci. Revenue dropped 11% year-on-year to €9.018 billion, operating profit fell 42% to €1.582 billion, and net profit declined 49% to €878 million, marking a challenging result for the group.
Regionally, while the Japanese market remained strong, performance in the Asia-Pacific region (excluding Japan) was weak, contributing to the overall decline. This weakness is attributed to the slowdown in China’s economy and shifting consumer preferences.
The company also projected a 30% year-on-year decrease in operating profit for the second half of 2024, underlining the ongoing challenges in the market. In this context, the refinancing of real estate assets is seen as a critical measure to improve its financial performance.
Nevertheless, revitalizing a luxury brand is no easy task. Amid intense competition and evolving consumer demands, maintaining and enhancing brand value requires meticulous strategies and significant investment.