The company said Wednesday that first-quarter results at its flagship Gucci brand fell further, but said job cuts were likely as there were no signs of improvement.
Kering’s first-quarter sales fell 14% year-on-year, with Gucci’s sales falling 25%, missing analyst expectations and providing further evidence that the luxury industry is set for another tough year as shoppers in the United States and China, two of the industry’s most important countries, cut back on luxury purchases.
Visible Alpha analysts cited by HSBC forecast a 9.7% drop in Kering sales and a 19% drop in Gucci, which accounts for about half of Kering’s total revenue and two-thirds of its profits.
“We are increasing our vigilance to protect against macroeconomic headwinds,” Chairman and Chief Executive Francois-Henri Pinault said in a statement.
With sales expected to continue to fall by double-digit percentages next quarter, Kering executives told analysts on a conference call that they plan to reduce redundant staff at the group and brand level and in regions to cut costs.
“We are addressing any duplication that may exist within the organization,” said finance chief Armelle Poulou.
The group has closed 25 stores so far this year as part of a plan to shut about 50 underperforming boutiques.
Kering has come under pressure following the troubles at Gucci and a series of profit warnings, with its shares down more than 60% since March 2024.
Sales fell in both North America and Western Europe during the quarter, suggesting the group is more vulnerable than other big luxury companies after U.S. President Donald Trump’s recent announcement of tariffs sparked recession fears. The group derives most of its revenue from the fast-moving fashion industry.
Bernstein analysts said this was evidence that “Gucci’s renaissance is not yet on the horizon and could face a more difficult environment.”
Deputy Chief Executive Francesca Bellettini said Gucci had seen a “substantially downward trend” in store traffic.
The brand, which accounts for about two-thirds of group profits, recently appointed internal talent Demna as Gucci’s new design director, disappointing investors who had expected a prominent outside hire.
Kering executives said Demna had already begun working with the Gucci team but declined to say when his first collection would appear on the catwalk.
Analysts warned that the designer change, which will officially take effect in July, could delay the brand’s long-awaited rebound.
Bellettini said Demna’s new designs would arrive “gradually” as the company speeds up production and deliveries. “Some of them you won’t have to wait until 2026 to see.”
Asked whether the recent closure of a high-end Gucci salon in Los Angeles that catered to super-rich clients by appointment indicated a shift in strategy, Poulou said the company was still working to move the brand upmarket.