Gucci sales fall as Kering lags peers facing luxury slowdown

Gucci sales have fallen as Kering’s biggest brand grapples with the twin challenges of a luxury goods slowdown and internal tumult, which is set to weigh on the label’s profitability this year.

Comparable revenue at Gucci slid 7 per cent in the third quarter, Kering said on Tuesday. Analysts expected a drop of 6.2 per cent. Overall, sales at the Paris-based company declined 9 per cent, also missing estimates.

Kering’s performance has been lagging rivals as the luxury group controlled by the billionaire Pinault family navigates management and creative changes at Gucci. The brand, which generates about two-thirds of Kering’s operating profit, replaced its chief executive officer and creative director in the past year.

The disappointing performance would weigh on profitability at the Italian label, Kering’s deputy chief executive officer Jean-Marc Duplaix told analysts in a call. He said Gucci expected to take a 200 basis-point hit to its earnings margin this year.

Duplaix said investors should not expect that margin to improve next year, as Kering was planning more investments to guarantee the future growth of its crucial brand. Gucci’s recurring operating margin last year was 35.6 per cent.

Last month, the Italian label unveiled the debut collection of new creative director Sabato De Sarno, whose simpler designs marked a departure from the flowing fabrics and vibrant prints of his predecessor, Alessandro Michele. De Sarno’s new creations will go on sale starting in January.