As luxury demand slows and efforts to turn around Gucci, the company’s largest brand, continue to falter, Kering SA has issued a warning that its profit is expected to plummet in the second half of the year.
The Paris-based company said that recurring operating income, a crucial earnings indicator, may decrease by almost 30 per cent during the period compared to the prior year. In the second quarter, Gucci’s comparable revenue dropped 19 per cent, more than the 15.9 per cent decline predicted by analysts.
After appointing a new designer last year, whose designs are now being stocked more extensively throughout its network of stores, Kering has moved to revitalise Gucci. But due to poor demand, especially in China, the fashion firm was forced to issue an earlier profit warning in April.
Gucci is seeing a good reception for the brand’s new creations, Chief Financial Officer Armelle Poulou said. However, she added, there is less demand for the brand’s permanent leather goods like the Ophidia and Marmont bags.
Although Kering owns brands like Yves Saint Laurent and Balenciaga, the company still depends mostly on Gucci, which produced around two-thirds of the group earnings in the first half. The only well-known brand to grow in the second quarter was Bottega Veneta.
Premium businesses are feeling the effects of a downturn in consumer demand for expensive clothing and bags, even among groups that have historically shown resilience. The largest subsidiary of LVMH Moët Hennessy Louis Vuitton SE, which owns the Louis Vuitton and Christian Dior brands, released results that fell short of projections.
