Kering Group's first-quarter performance far below market expectations, Gucci is in a sales crisis, and the group's newly appointed designer faces a daunting revival task, but market recovery may take a long time to wait.

On Wednesday, April 23, Kering Group announced its first-quarter financial report, showing that the group's total revenue was €3.88 billion, far below analysts' expectations of €4.09 billion. More concerning is that the group's same-store sales fell by 14%, exceeding the analysts' expected decline of 11.9%. As Kering Group's flagship brand, which contributes over 60% of its profits, Gucci's performance is particularly poor.

According to media reports, Gucci's first-quarter revenue was only €1.57 billion, below analysts' expectations of €1.62 billion. Same-store sales plummeted by 25%, worse than the analysts' expected decline of 23.6%, marking several consecutive quarters of poor performance for the brand. The stagnation in the luxury goods market, reduced consumer spending, and U.S. tariff issues are ringing alarm bells for investors.

Over the past year, Kering's stock price has fallen by 50%, underperforming competitors like Richemont, Hermès, and LVMH. As of the time of writing, the stock price has dropped from last year's peak of €350 to around €175.

Kering bets on whether Demna can save Gucci?

Reports indicate that to rescue the struggling Gucci brand, Kering Group appointed Demna Gvasalia as its next designer last month.

As an internal talent who served as the artistic director at Balenciaga for ten years, Demna is known for his eye-catching designs, such as the oversized Triple S sneakers, which brought strong growth to Balenciaga.

However, media analysis suggests that Gucci, as a brand much larger than Balenciaga, is changing designers for the second time in about two years, meaning any transformation will take time. Kering Group's Chief Financial Officer Armelle Poulou, during a conference call, refused to confirm when Demna would launch his first collection for the brand:

Demna is part of the group, and he has been working with Gucci's team.

The luxury goods industry is under pressure, investor confidence is shaken

Kering Group's predicament is not an isolated case; the luxury goods industry as a whole is facing pressure.

According to media reports, the entire luxury goods industry is entering a period of weak growth, partly due to reduced consumer purchases. Additionally, U.S. tariffs and the escalating trade war further darken the industry's outlook. Poulou stated:

Kering Group has the ability to protect its profit margins by raising prices in the U.S., and the group is still analyzing the preliminary tariff announcements.

Even more resilient luxury groups, such as LVMH, the parent company of Louis Vuitton, and Hermès, have recently reported disappointing results.

For investors, this winter in the luxury goods industry may last longer, and significant rebounds should not be expected in the short term before consumer confidence recovers and global trade frictions ease