By
Bloomberg
Published
Apr 24, 2024
Kering SA warned that profit will plunge in the first half of the year after wealthy shoppers curbed spending on Gucci products.
Recurring operating income will drop between 40% and 45% in the first six months, Kering said in a statement Tuesday. That’s after comparable sales at Gucci — its biggest brand — tumbled 18% in the first quarter on slack demand in China.
Kering has been trying to turn around Gucci, which accounts for more than two-thirds of its operating profit. The luxury group last year named a new Gucci creative director, whose collections began entering stores in February. Kering has warned the turnaround will take time to bear fruit as the market for luxury goods cools.
“The market in China is currently quite polarized between an appetite of customers for the really high-end segment or for more affordable products,” Kering Chief Financial Officer Armelle Poulou told reporters Tuesday. “Gucci, being more positioned in the middle, is not benefiting from this polarization.”
This situation could evolve quickly because Chinese customers are in a “wait and see” attitude as the distribution of the new collections ramps up, she said. So far they “have been very well received, particularly in the ready-to-wear and shoes categories,” Kering said in the statement.
Kering’s performance continues to lag behind LVMH Moet Hennessy Louis Vuitton SE. The larger French rival — owner of some 75 luxury brands, including Christian Dior and Tiffany & Co. — delivered 3% revenue growth in the first quarter on an organic basis. Hermes International SCA, which has also withstood the downturn better than most peers, will report sales on Thursday.
Kering shares are down 12% this year, trailing a 9% advance in LVMH and a 23% gain by Hermes.