Investing.com -- Kering released its first-quarter trading update on Wednesday, revealing a 14% year-on-year drop in first-quarter revenue, and all brands missing market expectations except Saint Laurent. The company’s shares fell 4% in European trading Thursday.
Gucci and Bottega Veneta owner reported €3.88 billion in sales, down from €4.50 billion, and 3% below the company-compiled consensus as the luxury group continued to face macroeconomic headwinds and soft demand across key markets.
“As we had anticipated, Kering (EPA:PRTP) faced a difficult start to the year,” said Chairman and CEO François-Henri Pinault. “We are fully focused on executing on our action plans to reach our strategic and financial objectives and strengthen the positioning of our Houses.”
Sales in Kering’s directly operated retail network fell 16% on a comparable basis, with Asia-Pacific down 25% and Western Europe, North America, and Japan all declining by low double digits.
Wholesale revenue for the Group’s fashion houses plunged 23% due in part to tightened distribution.
Gucci, Kering’s flagship brand, saw revenue fall 25% to €1.57 billion, impacted by weak store traffic and a 33% drop in wholesale sales.
The company noted that the brand’s new handbag launches, including the Softbit line, had been “well received.” Gucci appointed Demna as its new artistic director during the quarter.
"With Gucci sales down -25% in 1Q25 to €1.6bn, it looks like Gucci is set to be a ~€6bn brand this year (much lower than mgmt’s prior MT target of €10bn) and in-line with investor feedback regarding the likely "true" size of the brand after overshooting on growth during the Michele era," Morgan Stanley analysts noted.
"The brand continues to suffer from low traffic and a particularly weak performance of carryover products," Barclays analysts commented.
Yves Saint Laurent revenue declined 9% to €679 million, with direct retail down 8% and wholesale off 24%. The 9% drop was better than the 10.4% decline expected by analysts.
Bottega Veneta was a rare bright spot, up 4% to €405 million, as the brand saw double-digit growth in Western Europe, North America, and the Middle East.
Kering’s Other Houses reported an 11% decline to €733 million, though Brioni and the Group’s jewelry brands performed strongly.
Kering Eyewear and Corporate revenue rose 4% to €558 million, supported by gains in the optical and beauty segments.
The group closed 25 stores during the quarter, ending March with 1,788 directly operated locations.
Kering is seeing a weak start to the second quarter of 2025, with management expecting group sales to decline by a double-digit percentage. This outlook is roughly in line with or slightly better than the 14% organic sales drop recorded in the first quarter, but still worse than the -7% decline forecasted by Visible Alpha consensus.
The company still expects the second half of the year to be better than the first half.
Sam Boughedda contributed to this report.