Kering to reduce its debt with a new real estate entity

According to an article in the Italian financial daily Sole24 Ore, the company is now considering creating a new company to house some of the property assets belonging to the luxury group, which are estimated to be worth around €4 billion. In this respect, Kering has just finalized the purchase of a historic 5,000-square-meter building in Milan on the prestigious Via Montenapoleone. This purchase alone represented an outlay of 1.3 billion euros.

Transferring the assets to a new company would allow Kering to try out value-enhancing strategies, such as a possible stock market flotation of this parallel entity, or to bring in external investors. Part of the Group's debt would be transferred to this new company, reducing the impact of debt on the company's balance sheet and easing pressure on cash flow to free up new funds for the development of the Group's brands. The new entity would also aim to make property purchases more profitable and manage rental contracts and renovations.

The luxury group's results for 2024 have had to be revised downwards, with forecasts predicting an operating profit of €2.5 billion, compared with €4.75 billion in 2023. If confirmed, this would be the lowest result for eight years.

Therefore, the property sector's stability could partially offset the volatility of the luxury goods sector, which has been severely tested in recent months. Kering's debt is partly the result of significant acquisitions completed during the last financial year, such as the purchase of a 30% stake in Valentino, a transaction worth €1.7 billion. The formation of the new company is expected to be formalised around the middle of next year. Among the properties involved in the deal are several prestigious buildings in Milan, New York, and Paris, including a building on rue Saint Honoré, which was acquired for €640 million and is intended to house the new Gucci megastore.