Kering Group released financial report, and Gucci's profit in the first half of the year decreased significantly.

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In the evening of April 23rd, Kering Group released its first-quarter financial report, which showed that its first-quarter revenue decreased by 10% year-on-year. Similarly, the first-quarter performance report previously released by another listed luxury goods company, the Louis Vuitton Group, also showed that the sales revenue decreased by 2% year-on-year. However, Bain Consulting in the United States still relatively favours the long-term demand of Chinese consumers.

The announcement shows that as of March 31, 2024, Kering Group's first-quarter revenue was 4.5 billion euros, with a 10% decrease on a comparable basis. Its core brand Gucci's revenue was 2.1 billion euros, and its organic revenue decreased by 18%, which was higher than the previously expected 19.4%. This shows that the star brand of this group is entering the channel of performance repair.

The parent company of Gucci, the global luxury goods giant Kering SA, saw its stock price tumble after the group unexpectedly warned in its financial report that due to the sharp decline in sales of its largest luxury brand Gucci, the group expects the profit scale in the first half of this year to decline significantly by up to 45%. In the early trading session of the Paris stock market, Kering Group's stock price once fell by 8.9%, reaching the lowest level since 2018. Kering Group's stock price has fallen significantly by about 20% this year, while the stock prices of French rival LVMH and Hermes have risen.

Kering Group is striving to revitalize the fate of its important brand Gucci, which accounts for more than two-thirds of Kering Group's overall operating profit. This luxury goods group appointed Sabato De Sarno as the new creative director of Gucci last year, and his creative designs have started to enter its various stores since February this year. However, Kering Group warned in its financial report that with the overall demand in the luxury goods market showing signs of cooling down, it will take time for the sales to recover fully.

Kering Group's chief financial officer, Armelle Poulou, told reporters on Tuesday: "The global consumer market is currently quite polarised, with some consumers preferring truly high-end luxury products, and others preferring more affordable products." "However, Gucci, which is positioned in the middle range, has not benefited from this polarisation."

Kering Group warned that it expects the group's overall recurring operating profit in the first half of this year to decline by about 40% to 45%. Prior to this, due to the weakening demand in the Chinese market, Gucci's comparable sales in the first quarter dropped significantly by about 18%.

The latest financial report data of Kering Group also shows that on a comparable basis, the group's sales in the first quarter decreased by about 10%, which is basically consistent with the warning information released by the group in March. Its second-largest luxury brand YSL (Yves Saint Laurent) saw a comparable sales decline of about 6%, while another well-known luxury brand Bottega Veneta achieved a double-digit growth rate in North America, Western Europe and the Middle East, with a comparable sales increase of 2%.

Armelle Poulou said that the distribution channels of the new collection have increased recently, but consumers in important demand markets such as China are in a "waiting and seeing" state. Kering Group said that so far, these new designs are "very popular, especially in the areas of ready-to-wear and footwear". Poulou added that it is expected that all products under Gucci will come from the new collection by the third quarter.

At the same time, Gucci is developing its exclusive brand of handbag products, which is a key category. Poulou said on a conference call with analysts that the company plans to accelerate the launch of new products this year.

Kering Group still lags behind LVMH, the parent company of LV, which has about 75 large luxury brands including Christian Dior and Tiffany & Co.. LVMH achieved 3% internalised revenue growth in the first quarter. Hermes International has also withstood the global economic downturn better than most of its peers, and the company will announce its sales performance on Thursday. Luca Solca, an analyst at Sanford C. Bernstein, wrote in a report: "In an environment of weak demand, brands in the process of transformation may encounter greater difficulties, which is not surprising, as consumers focus their money on some essential brands." "However, the magnitude of the profit decline is indeed surprising."

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