Gucci Sales Expected to Plummet by 20%, Kering Issues Warning

Photo of author
Written By Vikas Jangid

Lorem ipsum dolor sit amet consectetur pulvinar ligula augue . 

Gucci Sales Expected to Plummet by 20%

Kering issued a warning that Gucci sales are expected to plummet by approximately 20% in the first quarter, primarily due to a sharper decline than anticipated in the Asia-Pacific region. This setback widens the gap between Kering and its main competitors in the luxury sector.

Investor Reaction to Kering's Announcement
Following the late Tuesday release of this news, Kering's American depositary receipts experienced a 10% drop. Over the past year, the company's shares have fallen by 22% as Kering has struggled to rejuvenate Gucci, its flagship Italian brand responsible for a significant portion of its profits.

Challenges Faced by Kering in the Luxury Market
Owned by the billionaire Pinault family, Kering has encountered challenges in keeping pace with competitors like LVMH and Hermes International as luxury sales have slowed down, particularly in China. LVMH's diverse brand portfolio and Hermes's high demand for handbags have contributed to their greater resilience compared to Kering.

Concerns Surrounding Gucci's Performance
"Over the past few quarters, Gucci has been facing certain internal issues, and this recent update will add to concerns regarding consumer spending and the state of China's economy," analysts at Vital Knowledge conveyed in a client note.

Kering's Anticipated Decline in Comparable Sales: Kering, the parent company of brands like Balenciaga and Saint Laurent, anticipates a decline of approximately 10% in comparable sales for the period.

Challenges in Attracting Affluent Customers

In the last months of the previous year, Gucci experienced a decline in sales as the brand grappled with challenges in attracting affluent customers to its expensive Double G belts and Princetown slippers. One year ago, Sabato De Sarno was appointed as the brand's new designer.

"The verdict is still uncertain regarding whether the Chinese market will embrace Sabato De Sarno's concept of 'quiet luxury'," remarked Luca Solca and colleagues at Bernstein.

Kering reported that early ready-to-wear products from the latest Ancora collection have been receiving a "highly favorable reception." The availability of these products is expected to increase in the coming months, according to the company.

Growing Reliance on the US Market
As the recovery in China remains sluggish, luxury companies have become increasingly reliant on the US market. This poses a challenge for Gucci, which has a significant exposure to the Asian market.

Upcoming Quarterly Results Release: The company is scheduled to release its quarterly results on April 23.

Read more such news on techinsighttoday
Thank you so much for reading.

Leave a Comment