The latest Gucci store on Bond Street on September 27, 2023 in London, United Kingdom.
Mike Kemp | In pictures | Getty Images
Shares in French luxury group Kering fell greater than 9% in early trading on Wednesday after the corporate warned it expects a pointy drop in first-half profits attributable to slowing demand for its Gucci brand.
The group said on Tuesday it expected operating profit to fall by 40% to 45% in the primary half of the yr in comparison with the identical period in 2023, because it struggled to keep up market share within the increasingly demanding luxury market.
The stock pared losses barely and was down 7.8% at 9:15 a.m. London time.
Kering Chairman and CEO François-Henri Pinault said Tuesday the warning comes after the corporate’s first-quarter performance “deteriorated significantly.”
“Although we expected a difficult start to the year, sluggish market conditions, particularly in China, and the strategic repositioning of some of our properties, starting with Gucci, resulted in increased downward pressure on our sales,” Pinault said in a press release.
“Given this decline in sales and our firm determination to continue to invest selectively in the long-term attractiveness and uniqueness of our brands, we now expect a significantly lower operating result in the first half of this year.”
Group revenue fell to 4.5 billion euros ($4.8 billion) in the primary quarter, down 10% on a like-for-like basis.
The Paris-based company highlighted the expected downturn in a rare profit warning last month, saying the decline was attributable to declining Gucci sales, particularly in Asia.
Gucci’s decline
Gucci’s first-quarter sales fell 18% on a like-for-like basis, barely lower than the 20% decline it previously forecast.
The decline sets the style house aside from fellow luxury brands LVMH and Hermes, which have proven resilient despite economic headwinds.
Once a darling of the Kering Group, Gucci delivered strong ends in 2021, driven by an early boom within the Covid-19 pandemic era. Since then, the luxurious clothing line has struggled to keep up market share as even wealthy consumers tighten their belts within the face of upper inflation and switch to “quiet luxury” brands.
Kering reported a 6% decrease within the fourth quarter of 2023, with sales of all other major brands also falling, including Yves Saint Laurent. Notably, Gucci’s sales fell 4% on a like-for-like basis.
