Gucci sales fell six per cent in the third quarter as shoppers stayed away from its stores, dealing a setback to owner Kering’s efforts to return to growth under Chief Executive Officer Luca de Meo.
The luxury group disclosed the decline on Thursday, raising concerns about the pace of its recovery as weak demand in China, slowing momentum in the United States and the Iran war weigh on the business.
Gucci, which accounts for roughly half of Kering’s group profit, recorded sales of €1.29 billion, equivalent to $1.44 billion, during the quarter after adjusting for currency movements. Kering’s overall revenue declined by one per cent.
The company’s American Depositary Receipts fell 11 per
The company’s American Depositary Receipts fell 11 per cent following the trading update, reflecting investor concerns about its performance and the broader luxury market. Lower-than-expected quarterly sales reported by LVMH and Hermes have added to those concerns.
Kering’s finance chief, Armelle Poulou, declined to comment when asked during a media call whether returning to overall growth remained the company’s target for the year, directing attention to the publication of its full-year results.
The company said reduced customer traffic, particularly in China, remains Gucci’s main challenge, with sales at the brand declining for more than three years. Gucci also recorded a slight sales decline in North America.
Poulou said Kering plans to increase spending
Poulou said Kering plans to increase spending on marketing and customer experience to attract more shoppers, while continuing its cost-cutting measures and retail restructuring.
“We keep on carrying out our plan with the utmost discipline,” she said, adding that Kering had reduced its retail network by 105 stores and was targeting 125 closures by the end of the year.
De Meo, a former automotive industry executive who previously led Renault, took over Kering last year with a five-year turnaround plan aimed at doubling the group’s profit margin by the end of the decade.
The strategy seeks to raise the profit margin
The strategy seeks to raise the profit margin from 11.1 per cent in 2025 through cost reductions, further store closures and efforts to streamline supply chains.
However, analysts have warned that efficiency measures alone may not be sufficient to revive a business whose brands have lost some of their appeal among consumers.
Leadership changes across the fashion industry have also added to the uncertainty surrounding Kering’s creative direction. Anthony Vaccarello, creative director of Saint Laurent, the group’s second-largest brand, and Sean McGirr, designer at Alexander McQueen, left their positions this month.
Fashion industry media have also speculated about
Fashion industry media have also speculated about the future of Balenciaga creative director Pierpaolo Piccioli.
The developments are likely to increase pressure on Demna, who is approaching his first full year leading Gucci. He has sought to revive the brand through a bold shift towards daring, sexier designs reminiscent of its successful period under Tom Ford.
Demna has also introduced unconventional manufacturing decisions, moving production of his first sneaker models to China.
Kering’s shares initially rose after De Meo’s appointment but subsequently lost momentum, falling eight per cent over the past year amid a broader downturn in the luxury sector.
