Paris—Luxury conglomerate Kering faced declining sales in the first quarter, marked by ongoing struggles at its flagship brand, Gucci.
The company reported first-quarter revenue of €4.5 billion ($4.8 billion), marking an 11 percent year-over-year decrease (10 percent on a comparable basis). This decline was largely anticipated, as Kering had warned investors in a preliminary results announcement back in March, citing an expected revenue drop attributed to a significant sales decrease at Gucci.
Gucci notably underperformed, especially in the Asia-Pacific region, where first-quarter revenue plummeted by 21 percent (18 percent on a comparable basis).
Kering CEO François-Henri Pinault acknowledged the challenges, stating, “Kering’s performance worsened considerably in the first quarter. While we had anticipated a challenging start to the year, sluggish market conditions, notably in China, and the strategic repositioning of certain of our houses, starting with Gucci, exacerbated downward pressures on our topline.”
Despite these setbacks, Kering’s jewelry houses, including Boucheron and Pomellato, emerged as a bright spot, boasting double-digit revenue growth in the quarter.
The company’s jewelry brands fall under its “other houses” division, alongside Alexander McQueen and Balenciaga. For the first quarter, revenue in this division totaled €824 million ($882 million), down 7 percent year-over-year (6 percent on a comparable basis).
Kering Chief Financial Officer Armelle Poulou highlighted the strong performance of Boucheron and Pomellato in the Asia-Pacific region and Japan during the company’s earnings call. Boucheron notably celebrated the 20th anniversary of its “Quatre” collection, while Pomellato introduced its “Pom Pom Dot” reversible jewels collection.
Meanwhile, Qeelin continued to expand its presence, opening four new stores.
However, Kering faced challenges elsewhere. Revenue from the company’s directly operated stores, including its e-commerce platforms, declined by 11 percent year-over-year on a comparable basis, primarily due to reduced foot traffic. Revenue in the wholesale and “other” segment also decreased by 7 percent on a comparable basis as the company streamlined its distribution channels.
Analyzing regional performance, Kering’s sales in North America fell by 11 percent year-over-year in the first quarter, although North America remained the third-largest market by revenue percentage, accounting for 22 percent of total revenue, up from 21 percent in Q1 2023. Japan experienced the strongest growth with quarterly revenue up by 16 percent, while the Asia-Pacific region saw the steepest decline, down by 19 percent, attributed to challenging and volatile market conditions. Sales in Western Europe also decreased by 9 percent.
As of Q1, Kering operated 1,781 stores, up from 1,771 at the end of the previous fiscal year.
Looking ahead, the company anticipates continued challenges in the first half of the year. Poulou remarked, “The first half of the year is proving even tougher than we expected.” Despite this, Kering remains committed to investing in its brands, albeit with a more selective approach focused on achieving a meaningful return on investment.
The company forecasts a sharp drop in first-half profit, expecting a decline of 40 to 45 percent in first-half operating income. Pinault expressed confidence in Kering’s ability to navigate current challenges, stating, “All of us are working tirelessly to see Kering through the current challenges and rebuild a solid platform for enduring growth.”
