The French Luxury Goods Company Kering Experiences a Significant Decline in its Operating Results and Expects a Decrease in Recurring Operating Profit of 40% to 45% in the First Half-Year Compared to the Same Period Last Year. This Follows a Revenue Decline of 11% in the First Quarter, with the Company Generating 4.50 Billion Euros, Meeting Analysts' Expectations.
The Gucci brand, the group's main source of revenue, was particularly affected, with sales falling by 21% to 2.08 billion euros. According to CEO Francois-Henri Pinault, market conditions, especially in China, and the strategic repositioning of some brands, including Gucci, were challenges that increased the pressure on business results.
The new collections from Gucci, which have been available in stores since mid-February, have been very well received, especially in the clothing and footwear categories. However, these positive signals could be overshadowed by the general slowdown of the luxury goods industry, which has lost momentum after the pandemic-induced boom due to high interest rates and inflation, particularly burdening less affluent consumers.
Despite Planned Investments in Its Fashion Houses to Revitalize Gucci, with Sabato de Sarno as Creative Director, Analysts Warn that Improvements May Only Show Over Time. These Investments Come at a Time When Industry Sales Trends Are Normalizing.
The analysts at S&P Global Ratings note that especially brands that target status-conscious clientele, which make up the majority of Kering's customer base, may face more challenging conditions during times of macroeconomic slowdown. Luxury brands that cater to high-end customers, on the other hand, are likely to achieve better results as this customer group is more resilient during tough times.
In this challenging market environment, characterized by a slower-than-expected recovery in China and a general decrease in consumer confidence and discretionary spending, Kering is faced with the task of repositioning its brands while remaining financially stable.
