Luxury fashion may portray an image of glamor and exclusivity, but all that glitters is not gold.
Behind the five-figure-plus price tags and highly coveted brand names, the industry has struggled with declining sales and cautious consumer spending amid continued economic uncertainty.
Founded in 1963, Kering is the French multinational luxury goods group behind some of the most recognizable luxury houses, including Gucci, Saint Laurent, Bottega Veneta, Balenciaga and Alexander McQueen.
Despite being the world’s second-largest luxury group, with revenues of 14.7 billion euros ($17.38 billion) in 2025, Kering has faced increasing pressure in recent years. Leadership changes, changing consumer preferences and broader industry headwinds challenged its performance.
Now the company is preparing to embark on a major transformation that will reshape its entire business.
Kering ( PPRUY ) closed 133 stores of its brands in 2025, representing a net reduction of 75 units and bringing the total number of stores to 1,719 as of December 31. The company said during an earnings call that the closings targeted underperforming locations that no longer aligned with its strategy to increase sales and increase brand positioning.
Another 100 store closures are already planned worldwide, with further cuts under review. Gucci is expected to take the brunt of these discounts.
Kering said the move aims to strengthen its operational discipline while protecting its brand by offering a higher-quality retail footprint.
The company also reduced its inventory by 8% in 2025 and plans to reduce it further in 2026 to reduce costs and better meet consumer demand.
The closures come amid Kering’s declining financial performance.
For the full year 2025, total revenue was down 13% year-over-year and 10% on a comparable basis. Gucci, the group’s biggest and most influential brand, suffered the biggest decline, with revenue down 22% and 19% on a like-for-like basis, according to its latest earnings report.
“These results are not where we want to be, but they mark the bottom and the first steps of the change we have initiated,” Kering senior analyst Luca Solca said in the earnings call.
To reignite growth, Kering plans to reduce its reliance on fashion while expanding into other high-potential luxury categories.
“It is precisely this discipline that provides a sound financial basis to fund our turnaround,” Kering CFO Armelle Poulou said in the earnings call. “To support our brands, we continue to invest selectively in key areas while maintaining strict cost control in others.”
In October 2025, Kering agreed to sell its beauty division to L’Oréal for $4.7 billion, granting it an exclusive 50-year license agreement that will take effect in the first half of 2026, according to a company press release.
Both companies are also forming a luxury, wellness and longevity-focused joint venture that aims to accelerate innovation in fragrances and cosmetics for its flagship luxury houses, a space they see as high-growth and high-value over the long term.
“This partnership allows us to focus on what defines us best: the creative power and desirability of our Houses,” Kering CEO Luca de Meo said in the press release.
Beyond beauty, Kering sees jewelry as a resilient and underdeveloped opportunity in its portfolio. Although currently a small contributor to the group’s revenue, the category has held up better than fashion.
To strengthen its capabilities, Kering acquired Raselli Farco late last year and plans to continue investing in this sector. The company will share its full jewelery strategy in more detail at Capital Markets Day in April.
Kering’s management team has repeatedly emphasized creativity as the foundation of turnaround.
“Creativity is our North Star,” Solca said in the earnings call. “It’s what distinguishes luxury. But creativity becomes value only when execution follows at the same pace: in retail, in supply chain, in merchandising, in marketing. This is where we put our energy.”
Solca added that on the ground, Kering products are reconnecting with consumers. The company saw sales improve in the second half of 2025, suggesting early signs of stabilization.
“The moment is real: early, fragile, but real. And I can guarantee you that we will build on it,” said Solca.
Kering is not the only company struggling; fashion has gone through a persistent decline in recent years.
McKinsey & Company’s State of Fashion 2026 report predicts low single-digit growth for the global fashion industry in 2026. Macroeconomic volatility and tariff pressures are expected to continue to shape value-conscious consumer behavior, particularly in the US, where consumer sentiment remained subdued throughout 2025.
“Ultimately, 2026 is likely to be another year of dislocation for fashion companies,” McKinsey & Company Fashion Retail Analysts said.
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Most recently, luxury retailer Saks Global also revealed plans to close nine more stores following the closure of hundreds of locations and its Chapter 11 bankruptcy filing.
LVMH (LVMUY), the world’s largest luxury goods conglomerate, also faced headwinds, with revenue falling 5% for the full year 2025.
Meanwhile, e-commerce continues to expand its share of consumer spending.
With 84.3 percent of Americans shopping online, U.S. e-commerce spending reached $1.34 trillion in 2024 and is projected to exceed $2.5 trillion in 2030, according to Capital One Shopping.
However, brick-and-mortar stores remain the dominant preferred format for most consumers, accounting for about $14.4 trillion of total retail sales of $18.9 trillion in 2025, according to Euromonitor research compiled by EY.
“It’s clear that the physical store still plays an important role,” said EY Retail analysts Malin Andrée and Jon Copestake. “Not only do stores still have plenty of avenues to generate revenue, but they also have opportunities to generate new growth and alternative revenue streams, and by working in tandem with digital channels, they can maximize return on investment.”
Despite its recovery efforts, Kering shares are down 9.25% year-to-date since February 17. The stock currently has a consensus rating of “hold” from Wall Street analysts tracked by MarketBeat.
Recently, the company has undergone significant management changes. In September 2025, Luca de Meo replaced longtime CEO François-Henri Pinault, and creative director roles at his top three fashion houses, including Gucci, Saint Laurent and Bottega Veneta, changed.
“Kering has simultaneously changed the designers of its three main brands, a risky move given the group’s reliance on figures such as [Deputy CEO] Francesca Bellettini, who holds significant influence over the brand’s appointments and direction,” Third Bridge luxury apparel analyst Yanmei Tang told Fashion Dive.
“This top-heavy approach often leads to reactive, short-term decisions designed to plug immediate gaps.”
Gucci is Kering’s largest brand, accounting for 45% of its total revenue. For years, the company has relied on its performance, leaving it vulnerable to fluctuations.
In 2025 alone, Kering named Francesca Bellettini as Gucci’s new CEO in September, and Demna took over as creative director in July.
“Creative transitions take time and the retail environment has not been supportive,” said Carrara Advisory Industry experts. “Consumer sentiment in China has weakened. Aspirational buyers in the US have withdrawn. European tourism has changed. This confluence of factors has placed Gucci in a vulnerable position.”
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This story was originally published by TheStreet on February 18, 2026, where it first appeared in the Retail section. Add TheStreet as a favorite source by clicking here.