The Gucci crisis deepens and the profit of Kering Group halves.

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The luxury goods company Kering Group warned that as the crisis of its largest brand Gucci deepens, profits in the first half of the year will fall sharply.

Kering Group issued a announcement on Tuesday, expecting that recurring operating profit in the first six months of this year will decline by 40% to 45%. Due to weak demand in China, Gucci's comparable sales in the first quarter decreased by 18%.
Gucci accounts for more than two-thirds of Kering Group's operating profit. Kering Group appointed Sabato De Sarno as the new Gucci creative director last year, and its designed products began to enter the store in February. Kering Group warned that as the luxury goods market cools down, it will take time to reverse the current situation.
Amelie Poulot, the chief financial officer of Kering Group, told reporters on Tuesday that the Chinese market is currently clearly polarized, and consumers either like very high-end products or are products that are more affordable, while Gucci is in between and has not benefited from the polarized consumer demand.
She said that this situation may change quickly, because as the release of new collections increases, Chinese customers are in a "waiting and seeing" state. In the announcement, she said that the new designs are "very popular, especially ready-to-wear and footwear", and said that Kering Group expects that by the third quarter, all Gucci products will come from the new collection led by De Sarno.
At the same time, Gucci is also focusing on the handbag category. Poulot said on a conference call with analysts that Kering Group plans to accelerate the launch of new products this year.
After Kering Group issued a profit warning, American Depositary Receipts once fell by 5.3%, and its Paris stock price has fallen by 12% this year, while its competitor LVMH has risen by 9%, and Hermes has risen by 23%.

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