Investing.com – As 2025 approaches, the question of whether or not Gucci will reclaim its position as a leader in the luxury sector.
Analysts at UBS are skeptical of such prospects, citing a challenging market context and ongoing issues within its parent company. Kering (EPA:).
Gucci, which accounts for about 70% of Kering’s EBIT, has faced struggles over the past five years, including declining sales and profits.
Despite management’s efforts to revive the brand, the outlook for 2025 suggests that it is not yet Gucci’s time to shine.
The brand is forecast to experience a modest sales contraction of 1% in 2025. While retail sales are expected to remain flat, the decline in wholesale volumes reflects a broader trend of lower momentum.
Gucci’s EBIT margin is projected to fall to 19%, a slight decline from last year.
The contraction underscores the high costs associated with strategic initiatives, including those under the leadership of its new creative director, Sabto de Sarno.
UBS analysts note that while these measures are necessary for long-term brand elevation, they are unlikely to deliver immediate financial turnaround.
Adding to Gucci’s challenges is the broader economic environment, which has proven less favorable for brands targeting aspirational consumers.
Luxury sales in China, a critical market, are expected to remain weak, with a projected decline of 3% in 2025.
In contrast, the US market shows signs of recovery, with growth estimated at 5%, but this rebound alone cannot offset Gucci’s ongoing struggles.
Kering as a whole faces a difficult task in balancing brand investments with profitability. Group sales are expected to grow by just 1% in 2025, while EBIT margins are forecast to remain under pressure.
The company’s efforts to stabilize finances, including potential retail store closures and a focus on free cash flow generation, reflect a cautious strategy amid uncertain conditions.
Analysts have also flagged risks that could further complicate Gucci’s trajectory. These include Kering’s other commitments, such as another change in creative leadership from a €4 billion put option on Valentino, and the potential for financial strain.
Both factors can weigh heavily on a group’s balance sheet and ability to allocate resources effectively.
