A woman walks past a Gucci store in Milan, Italy, September 24, 2025. REUTERS/Yara Nardi

By Mimosa Spencer and Tassilo Hummel

PARIS (Reuters) -Kering's overall group sales fell 5% on a like-for-like basis, the French group said on Wednesday, beating market expectations thanks to the performance of its smaller brands despite ongoing troubles at flagship label Gucci.

A 14% drop in Gucci's sales marked a seventh consecutive quarterly double-digit decline for the brand, which accounts for more than half of group profit, but Kering's comments on improvement in key markets China and the United States further fuelled newfound optimism in the sector.

In the first trading update under newly-appointed CEO Luca de Meo, hired to accelerate a turnaround after two years of falling sales, Kering said revenue in the July to September period reached 3.42 billion euros ($3.98 billion).

Analysts expected group sales to fall 9.6% with Gucci down about 15%, according to Visible Alpha data. Smaller houses Yves Saint Laurent and Bottega Veneta performed more strongly than expected, lifting overall group results.

"Kering’s third-quarter performance...remains far below that of the market," de Meo said in a statement. "We are working relentlessly on our turnaround, as shown by our recent decisions," he added.

Kering shares have risen 85% since de Meo's hire was announced in June, well ahead of a 12% gain for the STOXX Europe Luxury 10 over the same period, as investors bet on rapid restructuring and a refocus on core fashion.

CHINA TRENDS IMPROVE

De Meo, a former Renault boss whose package included a 20 million euro sign-on bonus in addition to fixed and variable annual pay, is racing to streamline the group, cut debt and steer resources toward Gucci's revival.

This week, the firm announced the $4.7 billion sale of its beauty arm to L'Oréal with de Meo flagging more deals to come.

Trends in China improved markedly over the last quarter, Kering's Chief Financial Officer Armelle Poulou told journalists on a call, echoing similar remarks from LVMH and Hermes.

"Our performance remained negative in China but showed substantial sequential improvement," Poulou said, adding that other regions also improved.

LVMH last week reported better-than-expected quarterly sales, sparking a rally in luxury stocks on hopes the sector's prolonged slump in China and among aspirational consumers was easing.

Under the creative direction of former Balenciaga designer Demna, appointed this year amid a wider reshuffle in the industry, Gucci last month rolled out a fast-track "see now, buy now" approach in a bid to regain momentum.

The collection was praised by fashion observers and led to an uptick in store traffic, but Kering warned it would take time before the new styles would help significantly lift sales.

(Reporting by Tassilo Hummel; Editing by Kirsten Donovan)