Kering, the parent company of Gucci, has sold its stake in three prime real estate properties in Paris. The sale comes as Kering seeks to secure cash due to poor performance from its flagship brand, Gucci.
On the 16th (local time), the Financial Times (FT) reported that Kering had signed a contract to sell 60% of its equity in three properties located on the famous shopping sites Place Vendôme and Avenue Montaigne in Paris for €837 million (approximately 1.25 trillion won) to the French private equity firm Ardian. Kering will retain the remaining 40% of the equity and maintain its brand's presence in the buildings.
The buildings from which Kering sold its equity include stores of luxury brands Boucheron, Valentino, and Balenciaga, which fall under the Kering group. Valentino is an Italian luxury brand, but Kering acquired approximately 30% of its equity in July 2023.
Kering's sale of equity is unusual considering the trend in the luxury industry, where firms are competing to acquire prime shopping real estate. In recent years, luxury groups have poured billions of dollars into properties in major cities to project a luxurious image and attract wealthy shoppers. The world's largest luxury group, LVMH Moët Hennessy Louis Vuitton, has made significant purchases of properties along luxury streets such as the Champs-Élysées in Paris, Fifth Avenue in Manhattan, New York, and Rodeo Drive in Los Angeles.
In April of last year, Kering also acquired a building in Milan's shopping district for €1.3 billion (approximately 1.95 trillion won), marking the largest real estate transaction in Europe in the past two years. In January of the same year, it expanded its real estate portfolio by purchasing a building located at the corner of Fifth and 56th Streets in New York for $963 million (approximately 1.4 trillion won).
Previously, François-Henri Pinault, chairman of Kering, noted, "When a brand generates more than €3 billion (approximately 4.48 trillion won) in revenue, having stores in major cities is an indispensable element," adding, "We don't just buy buildings simply because they are in premium locations. We will only acquire them if it makes sense."
However, Kering's real estate shopping came to an end due to Gucci's decline, which accounts for two-thirds of the group's revenue. Last year, Kering issued a rare warning about profit downturns among major luxury groups. This was because Chinese consumers, who had been supporting Gucci's revenue, began to close their wallets as Gucci's sales started to decline. Following this, Kering's stock price fell by more than 38%, erasing its market capitalization of €27 billion (approximately 40 trillion won).
Kering plans to use the cash secured from the equity sale to support its own brands. Jean-Marc Duplaix, Kering's vice president, said, "We are very satisfied with this deal," adding, "It allows us to secure prominent stores in the long term while maintaining financial flexibility."