Kering’s first-quarter revenues will likely decline by 10 percent on a comparable basis, the Paris-based luxury group flagged in an unscheduled trading update Tuesday. The company cited slow sales at Gucci, which accounts for more than half of Kering’s revenues, as the principal driver of the drop. Gucci’s comparable revenues are likely to fall by 20 percent year-on-year, Kering said, noting particularly poor performance in the key Asia-Pacific region.
Gucci faced pressure to shake up its fashion image and commercial strategy after a historic boom piloted by designer Alessandro Michele and CEO Marco Bizzarri came back to earth and was followed by years of anaemic growth.
But sales have continued to slide under a revamped team including creative director Sabato De Sarno and CEO Jean-François Palus. The first collections by De Sarno did not arrive in stores mid-February, Kering flagged. The new collection, whose availability will gradually be ramped up over the coming months, is “meeting with highly favourable reception,” the company said.
Kering has taken a harder hit than most listed rivals as soaring demand for luxury in the wake of the pandemic slowed sharply in recent months. At Gucci, consumer interest in the quirky, maximalist vision put in place by De Sarno’s predecessor had been wearing thin for years, while an over-dependence on aspirational customers made it harder for the group’s second-biggest brand, Saint Laurent, to keep posting record grow.
Meanwhile, Bottega Veneta has sought to reduce its wholesale exposure, depressing sales and the continued after-shocks of a public relations meltdown at Balenciaga have made it harder for the brand to sustain interest in its chunky sneakers and logo hoodies.
Kering may not be the only company to report worse-than-expected results this quarter: US credit card purchases on luxury items fell 15 percent year-on-year in February, following a 19 percent drop in January, according to Citi. Sales in the key Chinese market have also continued to bounce back more slowly than hoped.
Hermès, Loewe, Loro Piana, Brunello Cucinelli and Zegna have continued to see customer interest surge in recent quarters. But efforts by more-accessible luxury brands to reposition themselves could backfire: higher prices risk further putting off entry-level customers, while savvy top spenders are hard to recruit.
“Most luxury companies have highlighted demand weakness in entry-level categories usually targeting aspirational consumers, with sharp multi-year price increases posing a risk to future volume growth,” Citi analyst Thomas Chauvet said in a note Tuesday.
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