Investing.com -- Kering (EPA:PRTP) shares fell sharply in early European trading on Wednesday after the luxury goods company warned that it would see a "sharply lower" first-half operating profit.
Kering's revenue on a comparable basis fell 10% during the three months ended in March to 4.50 billion euros. The decline was attributed in part to an adverse macroeconomic environment, softer foot traffic, and foreign exchange headwinds.
The revenue drop was also impacted by weak demand at its key Gucci brand, where revenue fell by 18% on a comparable basis. However, this was better than the Bloomberg consensus of a 19.4% decline.
"Kering's performance worsened considerably in the first quarter," said Chief Executive François-Henri Pinault in a statement. "While we had anticipated a challenging start to the year, sluggish market conditions, notably in China, and the strategic repositioning of certain of our Houses, starting with Gucci, exacerbated downward pressures on our topline."
As a result, Kering now expects to deliver a "sharply lower operating profit in the first half of this year."
The Balenciaga parent now expects a 40% to 45% decline in recurring operating income in the first half of this year compared to the opening six months of 2023.
"Kering's [first quarter] sales were as bad as had been expected. However, the limited visibility and much weaker profit outlook for [fiscal year] 2024 will no doubt weigh on shares," analysts at UBS said in a note to clients.
Sam Boughedda contributed to this report.