Shares in Kering sank 9 percent after a profit warning on falling Gucci sales.

Shares in French luxury group Kering plunged more than 9 percent at the open on Wednesday, after the company warned it expected a sharp decline in first-half profit as a result of falling demand for its Gucci brand.

The group said on Tuesday it expects first-half operating income to fall 40% to 45% compared with the same period in 2023, as it struggles to retain pocket share in the increasingly discerning luxury market. Is.

The stock was slightly lower to trade up 7.8 percent by 9:15 a.m. London time.

Kering Chairman and CEO François-Henri Pinault said on Tuesday that the warning came after the company’s performance in the first quarter was “significantly worse”.

“While we expected a challenging start to the year, sluggish market conditions, particularly in China, and the strategic positioning of some of our houses, starting with Gucci, have impacted our top line,” Pinault said in a statement. Downward pressure increased on the line,” Pinault said in a statement.

“Given this decline in revenue, coupled with our firm commitment to continue to invest selectively in the long-term appeal and differentiation of our brands, we now deliver a sharply lower operating profit in the first half of this year.” expect.”

Group sales fell to 4.5 billion euros ($4.8 billion) in the first quarter, down 10 percent on a comparable basis.

The Paris-based company flagged the expected downturn in an extraordinary profit warning last month, noting that the decline would be led by a decline in Gucci sales, particularly in Asia.

Gucci’s first-quarter sales fell 18% on a comparable basis, slightly less than the 20% decline previously projected.

The downtick separates the fashion house from other luxury lines LVMH and Hermès, which have remained resilient despite economic hardship.

Gucci was once a darling of the Kering Group, which delivered strong results in 2021 driven by the peak of the early Covid-19 pandemic period. The luxury fashion line has since struggled to maintain market share, even as affluent consumers tighten their belts amid high inflation and shift to more “quiet luxury” brands. are

Kering reported. 6 percent decrease In fourth-quarter 2023 earnings, sales are also falling at all of its other major brands, including Yves Saint Laurent. Gucci’s sales were notably down 4% on a comparable basis.