Shares of Kering surged on Tuesday after the prestigious French luxury company announced fourth-quarter sales that exceeded expectations, even though they reflected a year-on-year decline tied to reduced demand for its flagship Gucci brand.

The luxury fashion conglomerate, which also boasts brands such as Bottega Veneta, Balenciaga, and Alexander McQueen, experienced a 12% drop in fourth-quarter revenue, totaling 4.39 billion euros ($4.52 billion). This figure slightly surpassed the 4.29 billion euros projected by LSEG analysts.

Gucci, which makes up nearly half of Kering’s overall income, saw sales decrease by 24% year-over-year in the past three months, totaling 1.92 billion euros on a comparable basis, further extending the challenges faced by this once-iconic luxury label.

Kering’s stock rose by 5.5% at the opening on Tuesday.

For the full year, sales also fell by 12%, reaching 17.19 billion euros, slightly above the expected 17.09 billion euros.

The company’s operating income stood at 2.55 billion euros, aligning with updated forecasts from October but nearly half of the 4.75 billion euros achieved in the previous year.

In a statement, Chairman and CEO François-Henri Pinault remarked, “Despite a challenging year, we have accelerated the evolution of several of our Houses and made decisive moves to enhance the health and appeal of our brands for the long haul.” He added, “Our initiatives must remain persistent, and we are optimistic that we have positioned Kering for stabilization from which we will gradually return to a growth path.”

The French fashion house indicated slight improvements in sales within the Asia Pacific and North America regions for its brands: Gucci, Yves Saint Laurent, and Bottega Veneta, though it did not elaborate on specific markets.

Kering is the latest European luxury brand to release earnings reports recently, as investors look for indicators of recovery in a sector affected by a decrease in consumer spending, particularly crucial in the Chinese market.

Last month, investors were disappointed by only marginally better-than-anticipated annual results from the luxury giant LVMH. The market had high hopes for a rejuvenation across the sector following strong results from Richemont, the owner of Cartier, but ongoing weaknesses in LVMH’s fashion and leather goods, along with wines and spirits, hinted at further disparities in the industry.

Having significant exposure to the Chinese market, Kering has faced particularly sharp declines as Gucci has fallen out of favor.

On Thursday, the fashion group announced the exit of Gucci’s design head Sabato De Sarno, marking a significant shift since Gucci CEO Stefano Cantino took over last year to rejuvenate the brand. De Sarno, a minimalist designer, held the position for under two years after succeeding Alessandro Michele, known for his maximalist styles that previously defined the brand.

The announcement of De Sarno’s successor will come “in due course,” according to the company.

Simone Ragazzi, senior equity analyst at Algebris Investments, remarked on Monday that Kering is hoping to signal a turnaround for the brand with this new design leadership, though he noted that investors might remain wary due to lingering legacy challenges.

“The market has been holding onto this hope for a significant period. There is always a bit of uncertainty,” he remarked during a video call with CNBC.

“The brand has adjusted to fluctuations over the years, especially since it is one of the most fashion-sensitive luxury groups. The hope is that the new designer will reinvigorate the brand,” he continued.

Kering shares have experienced a 2.5% decline this year and have lost more than half their value since 2023.

Luca Solca, senior analyst in global luxury goods at Bernstein, highlighted that there have been improvements in operating profits across nearly all brands in 2024. However, he emphasized the challenge ahead for the company to regain its former glory.

“The absolute decline compared to 2023 is quite noticeable. This has been a challenging year for Kering, and that reflects in the stock performance. We anticipate that the market will emphasize the new creative direction for Gucci,” he concluded.