Kering Shares Fall 14% After Warning Gucci Sales Will Plunge 20% in Q1 2024

French luxury conglomerate Kering’s shares dropped 14% on Tuesday, after the company revealed that Gucci sales are set to fall 20% year-to-year in the first quarter of 2024, according to Bloomberg.

“In a first half that Kering expected to be challenging, current trends lead the Group to estimate that its consolidated revenue in the first quarter of 2024 should decline by approximately 10% on a comparable basis, from last year’s first quarter,” Kering wrote in a statement. “This performance primarily reflects a steeper sales drop at Gucci, notably in the Asia-Pacific region. Gucci comparable revenues in the first quarter are expected to be down by nearly 20% year on year.”

The warning slumped Kering’s market capitalization by approximately €7.9 billion EUR ($8.6 billion USD) in early session trading, negatively affecting the stock prices of neighboring luxury companies, including LVMH and Hermes, per Reuters.

Gucci, which composes half of Kering’s sales and two-thirds of the parent company’s profits, looks to regain financial prosperity while its key markets, particularly the Asia-Pacific region, face economic headwinds. The brand is also building out a new design identity, after shuffling its senior leadership with the appointment of Jean-François Palus as CEO and Sabato De Sarno as creative director.

De Sarno’s designs, which first entered stores in mid-February, will gradually be ramped up over the next several months. Kering stated that the new collection has been met with “highly favorable reception.” However, Jeffries analyst James Grzinic told Reuters that consumers have not been resonating with the brand’s “more classic, legacy products, such as the leather handbags that the label has emphasized as its moves upmarket.”

Grzinic added that the “encouraging” reception of De Sarno’s new Gucci designs is “dwarfed by that tough headwind.”

Kering will release its Q1 2024 financial report on April 23.