Gucci forecasts 20% sales drop due to Asia slowdown

Sales at Gucci are anticipated to experience a notable decline of 20% during the first quarter, primarily attributed to the slowdown observed in the Asian market, according to reports from its parent company Kering, headquartered in Paris.

This cautionary outlook contrasts with the performance of its competitors such as LVMH and Hermès, which have managed to maintain a level of resilience in their sales figures.

While the luxury market exhibited significant growth over the past decade, recent years have seen a slowdown in sales momentum.

Gucci, which heavily relies on the Chinese market, where it generates over a third of its sales, is particularly affected by the economic challenges faced by the region.

Kering highlighted a substantial decline in sales, particularly in the Asia-Pacific region, leading to this profit warning. The company is scheduled to disclose its financial results on April 23.

With Gucci contributing a substantial portion, accounting for two-thirds, of the group’s operating income last year, the performance of the brand holds significant weight within the Kering portfolio, which also includes prestigious labels like Yves Saint Laurent, Balenciaga, and Bottega Veneta.

In its recent financial report, Kering announced a 17% decrease in net profit compared to the previous year. The company’s shares have experienced a decline of over 23% over the past year, reflecting the market’s reaction to these developments.

Gucci Faces Sales Decline Amidst Rival Successes

While luxury giant Gucci anticipates a sales downturn, its competitor LVMH, boasting brands like Louis Vuitton and Moët & Chandon, exceeded sales expectations in 2023.

Hermes celebrated record-breaking annual sales, planning bonuses for all employees worldwide, showcasing resilience in the luxury sector.

Gucci’s focus on younger, aspirational consumers leaves it more vulnerable to economic fluctuations compared to its competitors.

Last year, Kering, Gucci’s parent company, made changes in top management, appointing Jean-François Palus as CEO and Sabato De Sarno as creative director.

The Ancora collection, overseen by De Sarno, debuted in mid-February, receiving an overwhelmingly positive response according to Kering.