Organic sales at Gucci were down 19 percent in the second quarter, below market expectations.
The Gucci store at Jio World Plaza, a newly established luxury mall in Mumbai. COURTESY
PARIS — Kering said net profit fell 50 percent in the first six months of the year after its star brand Gucci recorded another disappointing quarterly performance, and it expects the pain to continue into the second half.
The French luxury group on Wednesday issued another profit warning, saying it expects operating profit to decrease by 30 percent in the second half, after falling 42 percent in the first semester to 1.58 billion euros.
The decrease for the first six months of the year was in line with its guidance issued in April, predicting a 40 to 45 percent drop in first-half operating profit.
“Considering the uncertainties weighing on the evolution of demand from luxury consumers in the coming months following the slowdown recorded in the first half of 2024, Kering’s recurring operating income in the second half of 2024 could be down by approximately 30 percent compared to the second half of 2023,” the company said.
Net profit totaled 878 million euros, falling short of a company-compiled analyst consensus forecast of 930 million euros.
Group revenue was down 11 percent in the second quarter, both in reported and comparable terms, to 4.51 billion euros, said Kering, whose stable of brands also includes Saint Laurent, Balenciaga and Bottega Veneta.
Gucci again fell short of expectations, with organic sales down 19 percent, versus analysts’ predictions of a 17 percent drop. In reported terms, revenues were down 20 percent to 2 billion euros.
By comparison, organic sales at LVMH Moët Hennessy Louis Vuitton’s key fashion and leather goods division rose 1 percent year-over-year in the three months to June 30.
“In a challenging market environment, which adds pressure on our top line and profitability, we are working assiduously to create the conditions for a return to growth,” Kering chairman and chief executive officer François-Henri Pinault said in a statement.
“Our houses pursue their investments to enrich their offer, intensify the impact of their communications and reinforce the exclusivity of their distribution. We make certain that every one of these investments creates value for the long term,” he added.
“While the current context might impact the pace of our execution, our determination and confidence are stronger than ever,” Pinault concluded.
Comparable sales at Saint Laurent were down 9 percent in the second quarter, Bottega Veneta gained 4 percent and the “other houses” division — which groups brands including Balenciaga, Alexander McQueen and Boucheron — posted a 5 percent drop.
Kering eyewear and corporate, which includes the group’s fledgling beauty division, recorded a 5 percent increase in organic sales.
With luxury in a cyclical slump that analysts predict could last for one or two years, companies in turnaround mode are feeling the pressure more than market leaders.
Luca Solca, analyst at Bernstein, noted recently that Gucci is still “declining significantly” in China.
“The rise of accessible luxury Chinese brands coupled with a Chinese middle-class consumer on the back foot is apparently causing a quantum of trading down. This is a risk for brands that are suffering fading momentum. We have seen how this has played out for Gucci,” he said in a report last month.
“While the recent Gucci shows have attracted better feedbacks in the West, one doesn’t feel the ‘new Gucci’ in store. Influencers point out that Gucci is not improving, despite significant social media spend and effort,” Solca added.
Even LVMH, the sector leader, is feeling the pain. It reported on Tuesday that net profit fell 14 percent in the first half and revenues fell 1 percent in the second quarter, sending its shares down by up to 6 percent on Wednesday as part of a broader luxury sell-off.
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