SHANGHAI, China — Luxury conglomerate Kering is anticipating a rebound in growth this year, despite posting declines in sales for the third consecutive quarter. The latest report revealed that the company, which encompasses high-end brands such as Gucci, Yves Saint Laurent, and Balenciaga, is grappling with challenges, particularly under the leadership of new CEO Luca de Meo.

For the fourth quarter, Kering reported a 3% drop in sales on a comparable basis, totaling approximately 3.9 billion euros ($4.64 billion). This slight decline was marginally better than market expectations, but its flagship brand, Gucci, posted a more severe 10% decrease during the quarter — a decline that, while disappointing, was similarly less than what analysts had forecasted.

CEO Luca de Meo acknowledged on an earnings call that the company’s performance in 2025 did not reflect its full potential. For the year, Kering’s sales plunged 10% to 14.7 billion euros, with recurring operating income decreasing by 33%. The company’s operating margin also contracted to 11.1% due to these weaker sales figures.

Despite the unfavorable financial results, Kering’s shares experienced a significant uptick, rising as much as 14% before settling at an 11% increase. Nevertheless, the stock has seen a nearly 14% slump overall this year. This positive momentum appeared to buoy other luxury brands, with companies like Burberry, Hermes, and Brunello Cucinelli all reporting gains in early trading.

Amid these struggles, Kering’s performance reflects broader challenges faced by the luxury sector, particularly due to fluctuating consumer demand in China. As one of the industry’s primary growth engines, China’s recent economic pullback has strained luxury sales. Kering and other players in the market saw their fortunes dwindle following price increases made during the pandemic, which alienated customers.

To counteract this trend, Kering has introduced Demna as the new artistic director of Gucci, hoping to reignite interest in the brand. His initial collection, titled “La Famiglia,” was launched in the previous year, marking a significant step in refreshing Gucci’s image.

As an outsider to the fashion industry, de Meo’s appointment in 2025 raised eyebrows. He previously helped revitalize Renault in the struggling automotive sector, and investors are now keen to see if his strategies will translate to success within the luxury market. De Meo has highlighted his focus on addressing company debt and devising strategies to enhance profitability and brand desirability.

Kering’s outlook suggests hope for a return to sales growth and improved profit margins by 2026. While it remains vague about future strategies, the company plans to unveil a comprehensive long-term vision during its Capital Markets Day set for April. Analysts are encouraged by the early signs of recovery across Kering’s portfolio, but they emphasize that potential growth hinges on effective restructuring and innovative marketing strategies moving forward.

In addition to its renewed focus on luxury fashion, Kering is exploring opportunities in the wellness sector. De Meo expressed confidence in this new venture, citing it as a market with significant growth potential, further diversifying Kering’s offerings.

As Kering navigates this pivotal time, stakeholders are closely monitoring the company’s actions and the shifting dynamics within the luxury market. Insights from upcoming presentations and strategic moves may provide clearer indicators of Kering’s trajectory and the broader industry’s recovery phase.