A woman walks past the Gucci store on Fifth Avenue at Trump Tower on February 24, 2021 in New York City.
John Smith Corbis News | getty images
Kering Sales were lower than expected late Tuesday as the luxury group’s biggest brand, Gucci, remained a stumbling block despite new CEO Luca De Meo’s efforts to turn the company’s fortunes around.
First-quarter revenue came in at 3.57 billion euros ($4.21 billion), down 6% year-on-year on a reported basis, and flat on a comparable basis at constant exchange rates.
Gucci’s organic sales declined 8%, an even bigger decline than the 6% decline seen in the sell-side consensus cited by analysts.
The company, which also owns the Yves Saint Laurent, Bottega Veneta and Baleniaga brands, also said retail revenue in the Middle East declined 11% in the first quarter, after growth in the first two months of the year.
With 79 stores in the region, the Middle East represents approximately 5% of retail revenues.
Shares fell 6% in morning trading in Paris on Wednesday.
Although the results were disappointing, investors are focused on the company’s capital markets day on Thursday, where De Meo will present “Reconquering,” Kering’s strategic roadmap.
“Gucci remains our top priority. A comprehensive transformation is underway with decisive action on the customer, distribution and, above all, on proposition,” De Meo said in a statement after the bell on Tuesday.
Bernstein analyst Luca Solca described the results as a “reality check”.
“The 1Q26E update shows what we’ve seen many times with self-help stories: It’s easier and faster for the market to believe in a revival than it is for management to believe in a revival,” the analyst said.
Kering stock has outperformed most peers over the past year.
It comes as Kering, like many of its luxury peers, has seen several years of contraction after a bullish run that ended in 2022. Demand increased during the COVID-19 pandemic, leading to price increases and ultimately alienating customers. With weak demand in China, previously one of the region’s main growth drivers, businesses suffered losses.
Last year, Kering appointed De Meo to get the company back on a growth path. However, given his background in the auto industry, he was a surprise choice to many, with the stock up nearly 10% since he officially took charge on September 15, outperforming most peers as investors have become increasingly optimistic about his turnaround plans.
In February, shares rose by double digits after the company reported fourth-quarter results and De Meo gave an update.
