The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Yawen Chen

LONDON, Feb 10 (Reuters Breakingviews) - A luxury boss admitting they pushed price increases too far, too fast is unusual. Hearing it from $40 billion Kering PRTP.PA is rarer still, even if such candour is easier for a new chief executive. Shares rose more than 10% after fourth-quarter numbers that were merely less bad than feared, with group sales down 3% on a comparable basis. CEO Luca de Meo said the group recognised it had marked up its goods so far that volumes dropped sharply in some lines. His candour, while welcome, suggests the era of easy money is fading for Big Luxury.

A reckoning was arguably inevitable. Luxury houses used the pandemic and its inflationary aftermath to raise prices aggressively. Iconic bag prices in the United States are up about 46% since 2019, according to data intelligence outfit Luxurynsight, far outpacing inflation. At LVMH LVMH.PA, Louis Vuitton posted increases of roughly 55% on flagship models over that period, while Kering’s key brand Gucci enjoyed a more moderate 38% mark-up. Even so, shoppers now face far steeper entry points just as Chinese demand, long the industry’s growth engine, has cooled sharply. Rather than cutting list prices outright, de Meo plans to mostly adjust prices by introducing new, presumably cheaper products.

That does not make the turnaround easy. Gucci, the main profit driver, has seen sales fall by roughly a fifth in each of the past two years. Hopes for creative renewal rest on new design chief Demna’s debut show this spring in Milan. Financial levers are also in play. Kering said it has cut 75 stores last year, with more closures planned, and reduced operating costs by 9%. Asset disposals, including the recent sale of its beauty unit, are helping shore up the balance sheet. Still, yesterday’s profitability is now a distant memory: Kering’s operating margin was just 11% in 2025, down from nearly 30% in 2022.

Tuesday’s share price bump, and the fact Kering is valued at a higher multiple than arch-rival LVMH suggests investors think de Meo is taking the right medicine. Yet he still has to stop revenue falling, a mission that may become harder if consumers expect prices to now come down. He can draw some encouragement from UK peer Burberry BRBY.L, which also went through a similar restructuring to work through unsold stock.

De Meo’s pragmatism contrasts with the tone elsewhere. At $315 billion French rival LVMH, chief executive Bernard Arnault argues global prosperity and consumers’ desire for a better life will keep powering the sector. That may prove optimistic, especially in China, where economic strains and shifting tastes are making punters less keen on European goods. And Arnault will find it harder to boost prices if his chief rival isn’t. Despite the sector’s challenges, luxury groups are trading on average at a rich 28 times 12-month forward earnings, LSEG data show. The price of their goods may not be the only thing that needs to come down.

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CONTEXT NEWS

Kering sales reached 3.9 billion euros in the fourth quarter of 2025, the company said on February 10. That was down 3% from the previous year on a currency-adjusted basis, but beat analysts’ consensus forecast for a 5% fall, according to Visible Alpha.

Revenue at Italian flagship label Gucci dropped 10% in the quarter. The brand, which accounts for most of Kering’s profit, recorded its 10th straight quarterly decline, though this was not as bad as analysts’ expectations for a 12% fall. Gucci sales fell 19% for 2025 as a whole.

Kering’s annual operating income reached 1.63 billion euros, less than a third of its 2022 level. Its operating profit margin fell to 11% group-wide and 16% at Gucci, down from 28% and 36%, respectively, three years earlier.

Kering shares rose 11% to 288.6 euros as of 1032 GMT on February 10.

(Editing by Neil Unmack; Production by Shrabani Chakraborty)

((For previous columns by the author, Reuters customers can click on CHEN/yawen.chen@thomsonreuters.com))