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Sales at French luxury group Kering plunged in the first quarter, driven by a slump in demand at Gucci, underlining the scale of the turnaround facing its new creative director.
Kering, which also owns Saint Laurent and Bottega Veneta, reported a 14 per cent year-on-year decline in first quarter sales to €3.9bn. The weak performance was driven by a 25 per cent slump in comparable sales at Gucci to €1.6bn.
Kering, controlled by the billionaire Pinault family, has failed to ignite a turnaround of its biggest brand, where sales have been falling by double digit percentages for more than a year.
The brand enjoyed a multiyear boom before the pandemic, but its eclectic bohemian aesthetic fell out of fashion.
In an attempt to turn around its fortunes, Kering has shuffled around designers, introduced more subtle designs and moved to sell more products through its own stores, rather than wholesalers.
Bernstein analyst Luca Solca said Kering’s results confirmed that “the Gucci revival is yet to appear”, adding that softening luxury demand would make a turnaround more difficult.
The appointment of Demna Gvasalia as Gucci’s creative director, announced last month, sparked a sell-off in Kering’s shares.
Analysts questioned whether the former creative director at Balenciaga, known professionally as Demna, was up to the task of turning around the brand’s fortunes.
The attempted turnaround will take place in an industry already suffering from a drop-off in luxury demand in the key markets of the US and China. Hopes of a US-driven recovery this year have been dashed by President Donald Trump’s erratic trade war.
“The global environment does not weaken our determination to meet our goals, including at Gucci,” said chief financial officer Armelle Poulou on a call with investors on Wednesday, adding that Kering expected another double digit sales decline at Gucci in the second quarter.
Analysts have said it will probably take at least a year to revive Gucci, which generates two-thirds of Kering’s profit and half its sales.
Poulou said Kering was working on cutting costs in ways that did not further weaken sales. The group closed 25 Gucci stores in the quarter, adding to the 10 it closed in the previous quarter.
The 14 per cent drop in Kering’s first quarter sales was more severe than forecasts from analysts at Citibank and Barclays, who had estimated year-on-year falls of 10 per cent and 12 per cent respectively.
Kering was forced to issue multiple profit warnings last year. The group’s shares have lost 45 per cent of their value in the past 12 months.
