Gucci trouble leads to fears Kering profits will halve

Kering warns that its profits might be reduced by half due to weak sales at Gucci. The French luxury house, like most of its rivals, struggles with waning demands – especially in China.

Profits at eight-year low

Kering issued a profit warning for 2024 this week, expecting operating profit from recurring operations to halve to around 2.5 billion euros. This would be the lowest operating profit in eight years.

Group sales were already down 15 % in the third quarter, mainly due to disappointing performance of its flagship Gucci. The Italian luxury brand, which accounts for almost half of Kering’s sales and two-thirds of its operating profit, saw its sales plummet 26 % to 1.64 billion euros. Gucci is particularly affected by difficult market conditions, especially in the region Asia-Pacific, the French luxury house reports.

Worse than expected

Other brands in Kering’s portfolio also underperformed: Yves Saint Laurent saw sales fall 13 %, while the “other houses” division (including Balenciaga) recorded a 15 % drop in sales. Bottega Veneta was a noteworthy exception, with sales up 4 %, driven by double-digit growth in North America and Western Europe.

CEO François-Henri Pinault focuses on cost control and selective investments. He points to “major uncertainties” in demand for luxury products and a sharper than expected slowdown in the third quarter. The problems at Kering reflect a broader trend in the luxury sector: competitor/rival LVMH reported a 4.4 % drop in sales earlier this month.