KERING warned that its annual profit will fall to the lowest level since 2016 as a slump in Chinese demand for luxury goods hampers a turnaround of the French fashion group’s biggest label, Gucci.
Kering’s recurring operating income this year could be around 2.5 billion euros (S$3.6 billion), the company said on Wednesday (Oct 23). That would be the lowest level in eight years and less than the 2.8 billion euros analysts were expecting.
Comparable sales at Gucci, which makes up the bulk of Kering’s profit, slumped 25 per cent in the third quarter from a year earlier.
Kering’s ADRs in New York fell as much as 5.7 per cent on Wednesday. The shares have slumped more than 40 per cent this year, and are on track for their worst annual performance since 2008.
The results show how tricky it has become for Kering to reset its flagship brand amid a demand slowdown for high-end goods, particularly in China.
Gucci will take time to turn around, Kering chief financial officer Armelle Poulou told reporters on a call. She said concerns in China around youth unemployment and the real estate downturn are weighing on consumer confidence there.
Poulou said Kering is happy with the new aesthetic adopted by Gucci under Sabato de Sarno, the creative director who was appointed in early 2023. The designer brought a more minimalist style to the brand formerly known for its flamboyant looks under his predecessor Alessandro Michele, who left the label two years ago.
Earlier this month, the fashion conglomerate promoted a former Louis Vuitton executive, Stefano Cantino, to be Gucci’s new chief executive officer from Jan 1. Cantino joined Gucci in May as deputy CEO.
Kering is not the only luxury group to suffer from the high-end slowdown. The performance follows disappointing sales for the same period at LVMH’s key fashion and leather goods division, which includes Louis Vuitton and Christian Dior. BLOOMBERG
