Gucci's slide continued in the quarter, with like-for-like sales down 6% against a 3.3% decline penciled in by analysts. Group revenue fell 1%, and Kering stopped short of restating its goal of returning to growth this year.
The update hit the stock. Kering's ADRs tumbled as deep as 12% during New York trading, and earlier this month the shares slid after the company cautioned analysts that the backdrop for luxury demand was worsening. In Paris, the stock is down nearly 30% this year.
"The performance is not where we want it to be," said Chief Financial Officer Armelle Poulou on the analyst call. She said Gucci cooled in North America last quarter, while spending in China - the group's toughest market - remains muted.
Gucci's directly operated stores saw a 9% sales drop last quarter, a worse-than-expected result, but wholesale provided a boost that partially balanced the shortfall. Bernstein's Luca Solca cautioned that the wholesale lift could reflect rising commercial pressure on that channel, which he said would be negative.
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Gucci still does the heavy lifting at Kering, contributing about half of profit alongside brands such as Yves Saint Laurent, Balenciaga and Bottega Veneta. After a decade at Balenciaga, Demna Gvasalia was named the brand's creative director last year.
Luxury has softened more broadly, with recent quarterly sales at LVMH and Hermès coming in below expectations. Cartier owner Richemont reports next month, offering another read on high-end demand.
France's unrest adds another wrinkle. Kering said four of its Paris shops and one in Nice were affected by last weekend's violence and looting, and it is staying alert to additional risks amid expectations of more protests this weekend. The bottom line: growth is cooling, Gucci remains the swing factor for Kering's earnings mix, and the market is pricing that uncertainty into your portfolio's luxury exposure.
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