The Gucci store in Harbor City Shopping Center operated by Wharf Holdings Limited of Hong Kong, China on Friday, June 2, 2023.
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French luxury group stocks dry Gucci’s shares plunged 14% on Tuesday after the company warned that first-quarter sales were expected to fall 20% annually due to lower trading volumes in Asia.
The rare profit warning expects overall group revenue to fall 10% on a comparable basis in the first three months of 2024, setting the fashion house apart from other luxury brands. LVMH and Hermesremaining resilient in the face of economic headwinds.
Kering hit bottom in the Stoxx 600 after delaying its opening, dragging down other European luxury brands.shares LVMH, Christian Dior and Hermes Early trading was down more than 2%, while Burberry down 5.7%. As of 8:30 a.m. London time, Kering shares fell 14.3%.
Kering Group said in the report: “King Group expects the first half of the year to be challenging, but current trends lead the group to expect consolidated revenue in the first quarter of 2024 to be approximately 10% lower than the first quarter last year.” A statement.
“This performance mainly reflects a significant decline in Gucci’s sales, especially in the Asia-Pacific region. Gucci’s comparable revenue in the first quarter is expected to decline nearly 20% year-on-year.”
The slowdown is expected to come mainly from Asia, especially China, whose economy has been struggling.
Claudia Panseri, chief investment officer of UBS France, said the warning showed that China still faced headwinds amid broader macro pressures.
“The situation in China is probably a little bit different,” Panseri told CNBC, comparing China to the U.S. and European markets.
“We need more time to see consumer spending pick up. We need stability in the housing market. But, having said that, travel has also picked up around the world, so that should add some momentum to the luxury story. .
Panseri added that she remained bullish on luxury goods overall, with the market accounting for a large portion of the bank’s exposure.
“Obviously, we may need to be more selective, just because valuations are not cheap. But the overall picture remains,” she said.
Gucci’s problem
Gucci was once the darling of Kering Group; Strong results in 2021 were driven by early pandemic-era exuberance. Luxury fashion brands have since struggled to retain market share as even wealthy consumers tighten their belts and turn to more “quiet luxury” brands amid rising inflation.
Last month, Kering reported down 6% Revenue also fell in the fourth quarter of 2023, as did sales at all of its other major brands, including Yves Saint Laurent, Balenciaga and Alexander McQueen. Specifically, Gucci sales fell 4% month-on-month.
Chief Executive Francois Henri Pinault said at the time that the group would continue to invest in its brands, including Gucci, even if it meant lower profit margins. according to Reuters.
As part of a broader reform strategy, Kering Group reorganized Gucci’s senior leadership in 2023, appointing Jean-François Palus as CEO and Sabato De Sarno as creative director.
De Sarno’s new Ancora collection launched in mid-February and has been “highly praised,” Kering said in a report on Tuesday.
Kering Group will release revenue data for the first quarter of 2024 on April 23.
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