(Oct 24): Kering SA warned that its annual profit will fall to the lowest level since 2016 as a slump in Chinese demand for luxury goods hampers a turnaround of the French fashion group’s biggest label, Gucci.

Kering’s recurring operating income this year could be around €2.5 billion (US$2.7 billion or RM11.7 billion), the company said Wednesday. That would be the lowest level in eight years and less than the €2.82 billion analysts were expecting.

Comparable sales at Gucci, which makes up the bulk of the group’s profit, slumped 25% in the third quarter from a year earlier.

Kering’s shares rose as much as 1.3% in Paris early Thursday. They have still slumped more than 40% this year, and are on track for their worst annual performance since 2008.

The results show how tricky it has become for Kering to reset its flagship brand amid a demand slowdown for high-end goods, particularly in China.

Gucci will take time to turn around, Kering chief financial officer Armelle Poulou told reporters on a call. She said concerns in China around youth unemployment and the real estate downturn are weighing on consumer confidence there.

Poulou said Kering is happy with the new aesthetic adopted by Gucci under Sabato de Sarno, the creative director who was appointed in early 2023. The designer brought a more minimalist style to the brand formerly known for its flamboyant looks under his predecessor Alessandro Michele, who left the label two years ago.

Earlier this month, the fashion conglomerate promoted a former Louis Vuitton executive, Stefano Cantino, to be Gucci’s new chief executive officer from Jan 1. Cantino joined Gucci in May as deputy CEO.

The Gucci turnaround has been more painful than expected, according to TD Cowen analyst Oliver Chen. Kering could miss its revised guidance if new products don’t go down well with wealthy consumers, he said.

Kering isn’t the only luxury group to suffer from the high-end slowdown. The performance follows disappointing sales for the same period at LVMH’s key fashion and leather goods division, which includes Louis Vuitton and Christian Dior. 

Uploaded by Magessan Varatharaja