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Kering has warned that profits will almost halve this year after sales at Gucci plunged, with the French group grappling with a difficult turnaround at its biggest brand and deteriorating demand for luxury goods in Asia.
The Paris-listed group said on Wednesday that like-for-like sales fell 25 per cent in the three months to September at Gucci, worse than analysts expected.
Kering warned its full-year operating income would drop roughly 46 per cent below that of 2023 to around €2.5bn — less than the €2.85bn anticipated by analysts, according to forecasts compiled by Refinitiv.
It would be the lowest level in eight years, and a sharper fall than at the height of the pandemic in 2020.
For the group as a whole, like-for-like sales were down 16 per cent, coming in at €3.8bn, while the slide at Gucci marked a sharper decline than in previous quarters and the fifth straight quarter of falling like-for-like revenues.
The analyst consensus from Bloomberg was for group revenues of €3.96bn, or a 10.9 per cent fall on a like-for-like basis. For Gucci there were predictions of a €1.75bn or 20.66 per cent like-for-like fall.
Gucci accounts for around half the group’s revenues and two-thirds of operating profit.
Unusually for the luxury sector, Kering has issued several profit warnings this year and last warned in July that second-half operating income would be down 30 per cent.
Kering finance chief Armelle Poulou said the “challenging” quarter was marked by slowing demand in Japan and the rest of the Asia Pacific region, while North America had not proved very dynamic either.
“We are keenly aware that we are carrying out a radical transformation at Gucci in an environment that is far from optimal,” she told analysts, saying that was “affecting the execution” of the plan. She added the group was “pushing in the right direction”.
The trend confirms a broader slowdown in demand from shoppers, especially those in China.
Kering rival LVMH, the world’s largest luxury group and owner of Louis Vuitton and Dior, reported a fall in sales last week sparking concerns that the sector faces a prolonged period of volatility and muted growth.
Cosmetics maker L’Oréal also posted disappointing sales growth this week after Chinese demand dipped, with consumer confidence low despite government stimulus measures.
Few brands have been shielded from the downturn in the Chinese economy, with the exception of Birkin-bag maker Hermès whose products are considered the pinnacle of high-end luxury. Hermès reports third-quarter sales on Thursday.
Shares in Kering have fallen more than 40 per cent since the start of the year, contrasting with a 16 per cent drop at LVMH.
Gucci’s poor performance over the past year is putting pressure on chief executive François-Henri Pinault of the controlling billionaire Pinault family to fix underlying issues at the brand and show its once potent earnings machine can deliver.
Envied in recent years for its industry-busting sales growth under previous designer Alessandro Michele, the frenzy for Gucci’s flamboyant designs eventually faded.
Earlier this month Kering appointed Stefano Cantino, a former Vuitton and Prada marketing specialist, as chief executive, promoting him after he joined Gucci in a deputy role in May.
He has a mission to boost Gucci’s flagging performance alongside designer Sabato de Sarno who has adopted a sleeker aesthetic.
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