Kering Warns of 40%-45% First-Half Operating Profit Drop Due to Gucci Sales Decline
Kering, a French luxury group, announced a significant drop in first-half operating profit, forecasting a 40-45% decrease.
This follows a 10% decline in sales for the first quarter, totaling 4.5 billion euros ($4.8 billion).
Gucci, the company's star label and major revenue contributor, accounted for half of the group's sales and two-thirds of its profits.
The sales decline raised concerns about the luxury sector and China's economic recovery, which has been affected by a property crisis and high youth unemployment.
Gucci reported a larger-than-expected 18% decline in sales and a significant drop in first-half profits due to ongoing investments in the brand and a softening demand environment.
Analysts at Bernstein noted that brands undergoing transitions may face bigger challenges in this economic climate, but the extent of Gucci's profit descent was unexpected.
Luxury store traffic in Asia has been low, with the Chinese market being particularly divided between demand for high-end and affordable products.
Gucci, which is positioned in the middle, is not currently benefiting from this market polarization, but the situation could change rapidly.