In a bold effort to reduce Kering’s dependence on Gucci, the luxury empire’s longtime cash cow, billionaire François-Henri Pinault has triggered a new crisis—ballooning debt. By aggressively pursuing acquisitions across fashion, beauty, and real estate, Pinault aimed to reshape the company’s future. However, those moves now appear ill-timed, as they coincide with a broader slowdown in the luxury market and increasing global economic uncertainty, including trade tensions and rising interest rates.

Kering’s share price has plummeted by 60% over the past two years, amplifying investor concerns. Meanwhile, the family-owned Artemis holding group, which controls Kering and has a stake in Puma, is also wrestling with its own growing debt load. A recent convertible bond tied to Puma’s underwhelming performance could force Artemis to repay €500 million in cash. Kering, too, may soon be on the hook for billions more, as it faces a possible early buyout of the remaining 70% stake in Valentino as early as May 2026, a deal originally planned for 2028.

To manage its liabilities, Kering is now selling off property stakes and cutting operational costs—including store closures and layoffs—in a race to generate €2 billion in liquidity by 2026. But not all these divestments are proving fruitful. For instance, the company recently incurred a €100 million loss selling a 60% stake in three Paris buildings, highlighting the challenge of offloading assets without incurring write-downs. With its free cash flow down nearly 30% in 2024, Kering’s financial flexibility is increasingly constrained.

The company's adjusted net debt ratio has now surged to 3.8 times EBITDA, with UBS forecasting it could climb to 4.1 by 2025. That threshold is often considered a red flag for credit rating agencies, and bondholders warn that another rating downgrade—Kering’s third in three years—may soon be on the horizon. A lower credit rating would raise borrowing costs and restrict Kering’s ability to reinvest in brand revitalization efforts, including Gucci, which is still struggling to regain its former spark after the departure of designer Alessandro Michele.

In pursuit of diversification, Kering made cash-heavy investments in companies like Creed (€3.5 billion) and a 30% stake in Valentino ($1.9 billion), while also splurging on prime retail real estate in New York, Milan, and Paris. Insiders claim the company paid hefty premiums to outbid rivals, fearing that losing access to key retail locations could damage other labels like Saint Laurent and Balenciaga. These decisions added to the mounting financial pressure even as revenues softened across the luxury sector.

Adding to the complexity, Pinault’s Artemis bought a 53% stake in talent agency CAA for €3.5 billion, replicating his acquisition-heavy playbook outside the luxury fashion world. Artemis now carries €20.2 billion in net debt, more than twice the level from a year earlier. While Kering could consider slashing its dividend payouts to ease the burden, doing so would strain Artemis even further, since it depends on those distributions for liquidity. With rising debt, flat sales, and a global slowdown, both Kering and Artemis are now walking a tightrope that leaves little room for missteps.