Kering braces for a profit slump in the first half of the year as the luxury goods giant struggles to win back Gucci sales.
Operating profit for the first half of the year is expected to drop up to 45 per cent, the French multinational owner of Gucci said in a statement on Tuesday.
Kering’s chairman and chief executive officer François-Henri Pinault said: “Kering’s performance worsened considerably in the first quarter.
“While we had anticipated a challenging start to the year, sluggish market conditions, notably in China, and the strategic repositioning of certain of our Houses, starting with Gucci, exacerbated downward pressures on our top line.”
Kering said Gucci’s revenue was down 18 per cent in the first quarter of the year, despite the group’s previous turnaround efforts with the appointment of a new creative director for the brand last year.
Kering issued a profit warning last month for Gucci, which accounts for two-thirds of the group’s operating profit, that reverberated across the global luxury goods sector, sending shares in both the firm and its peers tumbling.
The problems can be traced to China as its sluggish recovery from the pandemic has bruised luxury markets.
Alongside recovery from the pandemic, China’s economy has been buffeted by a property crisis and high levels of youth unemployment.
This, coupled with what has been dubbed a “richcession” in other western markets, has hindered sales of designer brands.
Pinault added: “In view of this revenue decline, together with our firm determination to continue investing selectively in the long-term appeal and distinctiveness of our brands, we now expect to deliver sharply lower operating profit in the first half of this year.
“All of us are working tirelessly to see Kering through the current challenges and rebuild a solid platform for enduring growth.”