S&P shifts Kering outlook to negative as Gucci sales drop 25% in H1 2025
Bottom Line Impact
The negative outlook compresses Kering's financial flexibility, likely adding 30 to 60 bps to future funding costs if downgraded, forcing cash and margin defense at Gucci to protect earnings and brand equity while ceding near-term share to higher-rated peers unless turnaround execution accelerates materially.
Key Facts
5- S&P revised Kering's outlook to negative from stable; long-term issuer rating maintained at BBB+
- Gucci sales fell approximately 25 percent year on year in H1 2025; Gucci accounted for over 50 percent of Kering's EBITDA in 2024
- Asia-Pacific and China revenue declined 22 percent year on year in H1 2025
- Negative outlook reflects weaker operating performance and execution risk on turnaround amid a subdued luxury demand environment
- If downgraded one notch, euro IG spreads could widen 30 to 60 bps; on 5 billion euros of debt, annual interest expense could rise by 15 to 30 million euros at refinancing
Time Horizons
Key Roles Affected
Executive Summary
S&P kept Kering at BBB+ but cut the outlook to negative after Gucci and Asia-Pacific underperformed, compressing rating headroom and elevating execution risk on Gucci's turnaround. Near-term financing flexibility tightens, requiring rapid cash and margin defense to avoid a downgrade while sustaining brand equity investments.
Actionable Insights
Immediate Actions (Next 30-90 days)
Lock in liquidity and extend maturities by pre-hedging 2025 to 2026 refinancing, pause buybacks, and commit to a public deleveraging range with quarterly milestones
Rationale: Proactively addressing spread risk and signaling discipline can stabilize the outlook and reduce downgrade probability and funding costs
Role affected:CFO
Urgency level:immediate
Shift 15 to 20 percent of Gucci media to CRM, clienteling, and repeat-purchase cohorts; launch limited capsules to lift full-price sell-through by 300 to 500 bps
Rationale: Demand activation with low inventory risk and stronger lifetime value improves gross margin and cash conversion in a soft market
Role affected:CMO
Urgency level:immediate
Short-term Actions (6-12 months)
Reprioritize growth capex toward top-20 Gucci flagships and hero SKUs while deferring lower ROI openings and large M&A, including pacing of the Valentino option
Rationale: Concentrating investment on the highest productivity doors and products maximizes cash returns and protects brand equity during a rating-sensitive period
Role affected:CEO
Urgency level:short-term
Cut seasonal buys by 10 to 15 percent and raise carryover mix of icons by 5 to 7 points; protect AUR with micro price actions on top 50 SKUs
Rationale: Inventory discipline reduces markdown exposure and supports margin while sustaining brand desirability
Role affected:Chief Merchandising Officer
Urgency level:short-term
Risks & Opportunities
Primary Risks
- Rating downgrade to BBB within 12 to 18 months increases funding costs and constrains strategic flexibility
- Deeper China softness prolongs negative comps and pressures wholesale order books into FW25 and SS26
- Turnaround execution risk at Gucci delays full-price sell-through recovery and compresses EBIT margin
Primary Opportunities
- Mix upgrade via icons, leather goods, and high-jewelry to lift gross margin by 100 to 200 bps
- Beauty cash flows from Creed and selective fragrance launches to diversify earnings and support deleveraging
- Targeted Middle East and travel retail recovery to offset China weakness and improve traffic quality