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Investing.com -- S&P Global Ratings revised its outlook on Kering (EPA:PRTP) to negative from stable on Monday, citing deteriorating credit metrics amid ongoing challenges in the luxury sector.
The rating agency affirmed its ’BBB+/A-2’ ratings on the French luxury group, which owns brands including Gucci, Saint Laurent, and Balenciaga.
S&P expects Kering’s revenue to reach €14.8 billion-€15.0 billion for fiscal year 2025, with adjusted EBITDA of €3.6 billion-€3.7 billion, down from €4.5 billion in 2024. The company’s projected 2025 revenue represents a 27% decline from its peak sales of about €20.4 billion in 2022.
The rating agency forecasts Kering’s debt-to-EBITDA ratio will rise to approximately 4.0x for fiscal year 2025, up from 3.8x in 2024, with gradual deleveraging toward 3.5x by year-end 2027.
Kering is implementing several strategic initiatives to address its challenges, including optimizing its retail network with a planned net reduction of 80 stores in 2025, higher than its previous target of 50. The company is also focusing on cost-saving measures, inventory management, and potential asset sales.
The luxury group has already realized net cash proceeds of about €1.3 billion during the first half of 2025 from real estate sales in Paris and Tokyo. S&P noted that Kering is looking to dispose of more assets worth approximately €1.7 billion.
In March 2025, Kering appointed Demna, previously Balenciaga’s artistic director, as Gucci’s new artistic director effective July 2025. In June, the company named Luca de Meo as its new CEO, who will take office in mid-September 2025.
S&P highlighted that the personal luxury industry is facing significant challenges, with expected year-over-year negative growth in the low to mid-single digit range in 2025. Mainland China, representing about 20% of total industry value, continues to be the weakest market.
According to Euromonitor data cited by S&P, Kering’s market share in the personal luxury space has declined to 5.6% in 2024 from 6.1% in 2020.
S&P indicated it could lower Kering’s rating if its debt-to-EBITDA ratio remains above 3.5x without clear prospects of deleveraging. Conversely, the outlook could be revised to stable if the ratio improves to 3.5x or below on a sustainable basis.
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