Gucci sales to plunge 20% in first quarter on Asia slowdown, Kering says

KERING warned that sales at Gucci will plunge about 20 per cent in the first quarter due to a steeper-than-expected decline in the Asia-Pacific region, widening the gap between the French luxury company and its main rivals.

Kering’s American depositary receipts fell 10 per cent after the company published the release late Tuesday (Mar 19). The shares have dropped 22 per cent over the past year as Kering tried to revitalise Gucci, the Italian label that accounts for about two-thirds of profit, without success.

Controlled by the billionaire Pinault family, Kering has struggled to keep up with rivals such as LVMH and Hermes International as luxury sales have come off the boil over the past year, especially in China. LVMH’s broader brand portfolio and Hermes’s long waiting lists for handbags have made those companies more resilient.

“Gucci has been encountering some company-specific problems for a few quarters, but this update will raise further worries about the state of consumer spending and China’s economy,” analysts at Vital Knowledge wrote in a note to clients.

Overall, comparable sales at Kering, which also owns labels such as Balenciaga and Saint Laurent, will be down about 10 per cent in the period, the company said.

New designer

Gucci sales fell in the final months of last year as the label struggled to lure more wealthy shoppers to its pricey Double G belts and Princetown slippers. A year ago, Sabato De Sarno was named as the brand’s new designer.

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“The jury is out on whether the Chinese will like the Sabato De Sarno quiet luxury,” Luca Solca and colleagues at Bernstein said.

Early ready to wear products from the latest Ancora collection are meeting with a “highly favourable reception”, according to Kering. Their availability will increase in the coming months, the company said.

With a recovery in China slow to materialise, luxury companies have grown more dependent on the US. That is bad news for Gucci, which is particularly exposed to the Asian market. The company plans to release quarterly results on Apr 23. BLOOMBERG