A high-end Gucci boutique located in Paris, France on Tuesday, October 22nd, 2024.
Bloomberg | Getty Images
Kering’s shares fell Thursday after French luxury groups posted lower than expected first quarter sales and pointed out macroeconomic headwinds first.
The fashion giant’s revenue rose 14% year-on-year to 3.9 billion euros ($4.4 billion), according to a report on Wednesday, which is below the forecast of 40.1 billion by LSEG analysts.
Gucci’s sales, which account for almost half of the group’s total revenue, fell 25% on a peer-to-equal euro 1.57 billion, as the brand’s turnaround attempts are underway.
Kering’s shares fell 4.3% by 10am London time. This is after the opening of the market first halted stock trading. Stocks of other high-class groups Richmont, LVMH and Hermes It was also traded lower.
The company’s overall weakness was led by a 25% decline in group sales in Asia and a 13% DIP in both North America and Europe.
Kering Chairman and CEO François Henri Pineau said the company faced a “difficult start to the year” and highlighted further challenges ahead in the stricken high-end sector.
“In this environment, we are fully focused on action plans to reach strategic and financial goals and strengthen the home’s position in all markets,” he said in a statement.
“We are increasing vigilance as macroeconomic headwinds weather the face of our industry. I am sure that this will emerge stronger from the current situation,” he added.
Last month, Kering named Demna Gvasalia Gucci’s new artistic director, turning the disease’s main label around with its latest bid. However, investors have broken it in an appointment over Gvasalia’s previous research in a 2022 advertising campaign on the small Kering label Balenciaga label.
Gucci has struggled in a quarter of consecutive sales as its designs are no longer popular with shoppers and suffers from the recent recession in Asian markets, where high exposure to Chinese consumers once favored.
This has come amid a wider recession in recent years, amidst the weaker inflation rates and economic conditions in luxury markets.
That landscape appears to be changing at the turn of the year, with high-end fashion houses reporting brighter fourth quarter revenues slower. Nevertheless, analysts have previously warned that a tariff-induced macroeconomic slowdown could hinder future recovery.
“We believe that the weaker global stock markets and wider economic uncertainty places emphasis on confidence, further postponing the recovery in luxury demand,” wrote Adam Cochrane, a general retail and luxury equity research analyst at Deutsche Bank, earlier this month.
Luxury brands were expected to evacuate more than other retailers due to the immediate impact of tariffs. High-end labels can usually pass additional costs to wealthy consumers. However, analysts pointed out that brands that already have weaker sales, including Kering, may not do so.
“It also notes that increasing prices can be slower due to tariffs, as customer sentiment and general price elasticity decreases. This is an important difference between Kering and LVMH (LVMH has previously mentioned pricing as the main lever).”
