Kering slumps after profit warning; Gucci suffers in China

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Kering slumps after profit warning; Gucci suffers in China
Credit: © Reuters. - Kering’s shares slumped Wednesday, after the French luxury goods company issued a first-quarter profit warning, driven by weakness at its key brand Gucci in Asia.

At 10:15 ET (14:15 GMT), Kering stock fell almost 14% to €369.10, at its Paris listing.

Kering (EPA: PRTP ) said its comparable sales will be down 10% in the first quarter, significantly worse than consensus expectations for a 3% drop,while

Gucci’s sales will be down almost 20% — primarily on weak trading in Asia.

The warning underscores the challenge Kering faces as it seeks to reignite sales momentum at Gucci, under the creative direction of Sabato de Sarno, given it accounts for half of group sales and two-thirds of profit, while navigating economic headwinds in key markets, especially China.

“Weakness in Asia has been a recurring leitmotiv of the recent updates, as Chinese consumers have moved from ecstatic excitement about Gucci in the early period of the Alessandro Michele revolution, to a satiated attitude as Alessandro Michele became yesterday’s story,” analysts at Bernstein said, in a note dated March 20. 

“The jury is out on whether the Chinese will like the Sabato de Sarno quiet luxury.”

Bernstein maintained a ‘market perform’ recommendation on Kering, with a €456 12-month target price.

“The bad news on Kering is company specific, but is also a good reminder that consumer confidence and discretionary spend in China is soft,” Bernstein added.


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