The luxury group Kering, on a downhill slope for several months, announced on Tuesday that it anticipated a big drop in operational profitability (ROC) in the first half, “of the order of 40 to 45%”, after having seen its sales decline by 11% in the first quarter.
(AFP/ERIC PIERMONT)
Given the decline in first quarter turnover and “our determination to continue to selectively invest in the desirability and exclusivity of our brands over the long term”, the group anticipates a “significant decline” in operating income current in the first half, warns CEO François-Henri Pinault cited in the group’s press release.
“While we anticipated a difficult start to the year, market conditions, particularly in China, and the strategic repositioning of some of our houses, starting with Gucci, increased the pressure on our turnover,” according to the CEO.
Sales over the first three months of the year fell by 11% to 4.5 billion euros, as anticipated by Kering in March.
In the first quarter, Gucci, the flagship brand that the group is seeking to relaunch, saw its sales fall by 21% to 2.1 billion euros, weighed down by a slower-than-expected recovery in consumption in China.
“The difficulties that Gucci is experiencing are exacerbated in China,” underlined Kering’s financial director, Armelle Poulou, during a telephone exchange with the press. “The market at the moment in China is quite polarized between customer appetite for very high-end products or for more affordable products,” while “Gucci is more positioned in the middle,” she said.
Furthermore, Chinese customers “are waiting for the new collections,” she added. The collections of designer Sabato de Sarno, who succeeded Alessandro Michele at Gucci, are only gradually appearing in stores. They should represent 30% of the new offer in stores in June and the entirety in the third quarter.
Kering has already had a “difficult” 2023, according to its CEO. The group is seeking to relaunch its Italian brand Gucci, which represents 50% of the group’s turnover and two-thirds of operational profitability.
Other brands in the group are also slipping. In the first quarter of 2024, sales of Yves Saint Laurent fell by 8% to 740 million euros and those of Bottega Veneta by 2% to 388 million euros. The turnover of “other houses”, which includes Balenciaga, fell by 7% to 824 million euros. Only Kering Eyewear jumped 24% to 536 million euros.