Gucci Sales Slump Deepens Kering’s Woes Amid Luxury Market Slowdown

By James, Admin
April 25, 2025 – 1:00 PM CST, Chicago, IL`

Kering, the French luxury conglomerate behind brands like Gucci, Balenciaga, and Yves Saint Laurent, reported weaker-than-expected first-quarter sales on April 24, 2025, driven by a deepening slump at its flagship brand, Gucci. The results, which saw Gucci’s sales drop 18% year-over-year, highlight the broader challenges facing the luxury sector amid economic uncertainty and shifting consumer preferences.
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Gucci, which accounts for roughly half of Kering’s revenue, has struggled to regain momentum following a post-pandemic boom. The brand’s pivot to minimalist designs under creative director Sabato De Sarno has failed to resonate with consumers, particularly in key markets like China, where economic slowdown and a property crisis have curbed spending. Kering’s overall sales fell 11%, missing analyst expectations.

The luxury sector’s woes extend beyond Gucci. Competitors like LVMH and Richemont have also reported softening demand, with global luxury sales projected to grow just 3% in 2025, down from 8% in 2023. Rising interest rates, inflation, and geopolitical tensions, including U.S.-China trade disputes, have dampened consumer confidence, particularly among the affluent.

Kering’s stock fell 7% in Paris trading, reflecting investor concerns about the company’s ability to navigate the downturn. CEO François-Henri Pinault acknowledged the challenges, stating, “The luxury market is undergoing a structural shift, and Gucci’s repositioning will take time.” The company has invested heavily in store renovations and marketing but faces pressure to deliver results.

China, once a growth engine for luxury, is a major pain point. The country’s GDP growth, forecasted at 4.5% for 2025, has been hampered by a property sector crisis and declining consumer spending. Wealthy Chinese consumers, who account for a third of global luxury purchases, are cutting back, with many opting for domestic brands or delaying purchases amid economic uncertainty.

Kering’s challenges are compounded by internal issues. Gucci’s leadership transition, including the departure of former CEO Marco Bizzarri in 2023, has created uncertainty. De Sarno’s vision, intended to refresh the brand, has been criticized for lacking the bold flair that defined Gucci under Alessandro Michele, whose maximalist designs drove sales in the 2010s.

The broader luxury market faces structural headwinds. In the U.S., Trump’s tariff policies, though paused for some partners, threaten to raise costs for imported goods, potentially squeezing margins. European brands like Kering also face currency fluctuations, with a stronger euro impacting competitiveness in Asia and the U.S.

Sustainability concerns are another challenge. Consumers, particularly Gen Z, are increasingly demanding eco-friendly practices, but Gucci’s reliance on leather and fast-paced collections has drawn scrutiny. Kering has pledged to reduce its carbon footprint by 40% by 2030, but progress is slow, risking alienation of environmentally conscious buyers.

Competition within the luxury sector is intensifying. LVMH’s Louis Vuitton and Dior have maintained stronger sales by targeting ultra-wealthy clients less affected by economic swings. Smaller brands like Bottega Veneta, also under Kering, have outperformed Gucci, with a 5% sales increase, highlighting the uneven recovery within the conglomerate.

Kering’s response includes cost-cutting and a focus on high-margin products like handbags and jewelry. However, analysts question whether these measures can offset Gucci’s decline, given the brand’s outsized role in Kering’s portfolio. The company is also exploring digital channels, with e-commerce sales up 10%, but this growth is insufficient to counter physical store losses.

Geopolitical risks add further complexity. The Ukraine war and Middle East tensions have disrupted supply chains for luxury materials like leather and gold, increasing costs. Trump’s softened stance on China tariffs offers some relief, but potential retaliatory measures from Beijing could hit European brands operating in Asia.

Kering’s long-term strategy hinges on Gucci’s turnaround. Pinault has signaled patience, but shareholders are restless, with some calling for a leadership shakeup or divestment of underperforming brands. Balenciaga, another Kering label, has faced its own challenges, with sales flat after a 2022 controversy over its advertising campaigns.

The luxury slowdown also reflects broader economic trends. Middle-class consumers, a growing segment of luxury buyers, are pulling back as inflation erodes purchasing power. In Europe, energy costs and economic stagnation have further constrained discretionary spending, impacting Kering’s home market.

Analysts see parallels with past luxury downturns, such as the 2008 financial crisis, but note unique challenges today. Social media’s influence has amplified consumer scrutiny, while e-commerce has shifted purchasing patterns. Kering’s ability to adapt to these trends will determine its recovery trajectory.

Looking ahead, Kering faces a delicate balancing act. Restoring Gucci’s allure without alienating its core clientele, navigating geopolitical risks, and addressing sustainability demands will require strategic agility. The company’s next quarterly report, due in July 2025, will be a critical test of its progress.
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Ultimately, Kering’s woes reflect a luxury sector at a crossroads. Gucci’s sales slump underscores the risks of relying on a single brand in a volatile market. As economic and consumer trends evolve, Kering must innovate or risk falling further behind in an increasingly competitive landscape.