Kering's Shares Slide as Luxury-Goods Boom Fizzles

Shares of Gucci owner, Kering, fell to their lowest level since March 2020 after reporting third-quarter sales that missed consensus expectations, signaling the end of the postpandemic luxury-goods boom.

Overview

At 0806 GMT on Wednesday, Kering's shares dropped 3.6% to EUR392.80, reaching their lowest point since March 2020 at the peak of the pandemic. This year, the stock has fallen over 18%, while France's CAC 40 blue-chip index has risen by 5.8% and the pan-European Stoxx Europe 600 has gained 1.9%.

Q3 Sales Decline

Kering, the French luxury group that owns several well-known brands including Yves Saint Laurent and Bottega Veneta, reported a drop in revenue to 4.46 billion euros ($4.72 billion) for the third quarter, compared to EUR5.14 billion in the previous year. On a comparable and constant-currency basis, Kering's revenue decreased by 9%. Analysts surveyed by FactSet had anticipated sales of EUR4.52 billion.

During the same period, Gucci's revenue declined by 7% on a comparable basis, while Yves Saint Laurent and Bottega Veneta saw their sales drop by 12% and 7% respectively. Kering stated that comparable revenue at the group's other brands also declined by 15%.

Analysis and Outlook

Analysts at Jefferies noted that Kering's quarterly sales were as weak as expected and aligned with the trends reported by larger competitor LVMH Moet Hennessy Louis Vuitton earlier this month. Although Kering has already indicated a decrease in Gucci's profit margins due to a turnaround initiative, the update suggests that weakness extends beyond the flagship brand.

Many luxury-goods companies, after years of impressive performance, are now contending with declining demand for their products. Factors such as inflation, high interest rates, and China's economic struggles have all contributed to the challenges faced by the industry.