Due to weak demand, the global third-largest luxury goods group Kering SA expects a sharp drop in sales in the first quarter.
Luxury goods giant Kering SA (Kering) announced today that due to lower-than-expected demand in the Asia-Pacific region, it is expected that sales of its brand Gucci in the first quarter of this year will plummet by about 20%, dragging the group's comparable sales down by 10% year-on-year.
After the announcement, Kering SA's US stocks plunged before the market opened, falling by over 14% at the time of writing, marking the largest single-day decline since 1992.
Kering SA's pessimistic profit guidance this time reveals the difficult situation in the current luxury goods market. Citigroup analyst Thomas Chauvet stated that Kering SA's unexpectedly statement is &#34;a rather worrying signal for the luxury goods industry.&#34;
Following the news, the luxury goods sector in European stocks collectively declined, with Kering SA's competitor PRADA's Hong Kong stock price also falling in response, plummeting by 11% at one point and closing down by over 2%.
Kering SA, controlled by the French billionaire Pinault family, was founded in 1962 and is the world's third-largest luxury goods company, following behind Richemont Group and LVMH, owning brands such as Gucci, Saint Laurent, and Balenciaga.
It is reported that Gucci is the core brand of Kering SA, generating about two-thirds of the group's revenue. However, whether in terms of design changes or marketing strategies, Gucci has recently failed to effectively attract Asian consumers' attention. Meanwhile, competitors such as LVMH and Hermès are demonstrating stronger market resilience with a more extensive brand portfolio and highly attractive scarcity of products.
As the recovery in the Asia-Pacific market progresses slowly, the luxury goods industry is increasingly relying on the US market. This appears to be more disadvantageous for brands like Gucci that are particularly dependent on the Asian market.
Previously, Gucci attempted to attract customers by appointing Sabato De Sarno as the new designer and launching a new collection with a more elegant and simple style. Although this strategy has received initial market recognition, whether it can drive sales growth remains to be seen.
Kering SA's fourth quarter and full-year financial report for 2023, announced last month, also fell short of expectations. The report showed that in the 2023 fiscal year, the group's revenue fell by 4% year-on-year to 19.6 billion euros, and net profit fell by 17% year-on-year, below expectations;
Revenue in the fourth quarter fell by 6% year-on-year to 4.97 billion euros.
Kering SA is expected to announce its performance report for the first quarter of the 2024 fiscal year later this month, providing a clearer view of the challenges faced by Gucci and the entire luxury goods industry

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With deteriorating demand in Asia, Kering SA is expected to see a 10% year-on-year decline in sales in Q1

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Kering

Luxury goods are under dark clouds! Kering SA warns that Gucci's sales will plummet by 20%, causing the company's stock price to experience the largest single-day drop since 1992!