On Tuesday, Kering issued an alarming profit warning that group revenues would plunge 10 percent in Q1 2024. This is sharply steeper than the 6 percent decline in Q4 and, more alarming still, a sharp departure from many analysts’ expectations for positive growth in the first three months of the year.
The statement from Kering warned that H1 would be tough due to weak Gucci sales in Asia Pacific. Gucci comprises about half of Kering’s group revenues, and the guidance was to expect a 20 percent plunge in Gucci sales in Asia during Q1.
Economic growth is expected to slow in China during 2024. The government expects GDP to grow by 5.0 percent after hitting 5.2 percent in 2022 though the market expects even weaker results. However, other luxury brands expect continued strong sales in Asia this year.
The market reacted swiftly with Kering shares down around 13 percent since the statement. Other luxury brand stock prices came under some pressure after the Kering plunge but have since experienced a small bounce back.
The question now is whether Kering is pointing to over optimistic expectations for the rest of the luxury industry in H1? Kering has underperformed for years under slew of management changes and strategy re-directions. So perhaps this is an idiosyncratic, Kering-specific, risk? Yet, this is a space to watch.
Kering’s statement is available here: https://www.kering.com/en/news/preliminary-information-regarding-the-first-quarter/