Gucci’s first-quarter sales dropped by 20%
Kering issued a warning, stating that the steeper-than-expected decline in the Asia-Pacific region was the reason behind Gucci’s 20% sales decline in the first quarter.
What happened with the Gucci sales during the first-quarter of the year?
The luxury conglomerate issued a warning on Tuesday, predicting that a decline in Gucci‘s performance would cause parent company Kering’s comparable sales to fall by 10% year over year in the first quarter. One month before Kering scheduled to release its complete Q1 earnings report, an unexpected announcement is made.
Kering stated:
“This performance primarily reflects a steeper sales drop at Gucci, notably in the Asia-Pacific region. Gucci comparable revenues in the first quarter are expected to be down by nearly 20 per cent year-on-year.”
Under the ownership of the billionaire Pinault family, Kering has found it difficult to compete with rivals such as LVMH Moet Hennessy Louis Vuitton and Hermes, particularly since luxury sales have declined recently, particularly in China. Hermes’s lengthy handbag waiting lists and LVMH’s wider range of brands have strengthened those businesses.
Sales have fallen due to weaker demand despite efforts to turn the brand around, which has affected the performance of the group. Sales in the fourth quarter of 2023 decreased by 4%, according to Kering, which put it behind its competitors. Kering’s revenue for the entire 2023 year decreased by 2% to €19.6 billion.
The unexpected announcement from Kering is a “rather worrying signal for the luxury goods sector,” according to Citigroup analyst Thomas Chauvet. The company’s largest brand is suffering from “being in the midst of a major design and management transition, with limited penetration from early products”.
The brand’s first collection under creative director Sabato De Sarno, who joined in January 2023, is currently being stocked in stores.
The Kering Goup continued:
“Early products, primarily ready-to-wear, from the Ancora collection have been on offer in selected Gucci stores since mid-February. The new collection, whose availability will gradually be ramped up over the coming months, is meeting with highly favourable reception.”
Kering has outlined a plan to entice wealthy people with a variety of brands. Gucci, for example, has been rolling out Gucci Salons devoted to extremely high-end offerings as part of its “elevation” strategy.
François-Henri Pinault, the CEO and chairman of Kering, stated the following at a press conference in February:
“We are a group that has firepower with aspirational clientele and consequently the more sophisticated, mature segment is less developed than for some competitors who are positioned in timeless [luxury].”
Kering’s warning alarmed investors in some other fashion companies, even though the company has been dealing with problems unique to Gucci. In Hong Kong, shares of Prada fell by up to 11%.
Kering did not specifically mention revenue from other houses such as Saint Laurent, Balenciaga, or Bottega Veneta in a preliminary statement. Turnover will also be impacted by the latter, which is believed to have been cutting back on its wholesale channel in favour of DTC sales.
Balenciaga is still recovering from its ad gaffe from the previous year, gaining back clients who had not yet returned to the brand.
On April 23, Kering will release its complete Q1 profits report.
Conclusion: Gucci sales dropped by 20 percent during the first quarter of the year.
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