LONDON, Oct 23 (Reuters) – Shares in Gucci owner Kering dropped 11% on Friday after the group reported further sales declines, but said it would stick with CEO Luca de Meo’s turnaround plan and accelerate store closures, aiming for 125 by year-end.
The recovery long promised by luxury brands seems nowhere in sight, as the expansion of war in the Middle East along with China’s tax crackdown on the wealthy piled further pressure on the world’s biggest luxury conglomerates in the third quarter, and executives buckled in for a tough winter.
Riots in Paris, leaving Louis Vuitton shop windows smashed and electric-bike bonfires near luxury shopping mecca Place Vendome, threw into sharp relief the political risk faced by luxury brands not just abroad but also at home.
Shares in LVMH and Hermes were also down 1% to 1.5% on Friday, as crude prices hit their highest level since early May, worsening the squeeze on households that has curbed consumers’ ability to splurge on handbags and clothes.
Gucci’s downturn has persisted despite de Meo’s plan to make the brand’s pricing more enticing to middle-class consumers and creative director Demna’s new collections hitting stores.
“The progress made on improving brand desirability remains in its very early stages,” JPMorgan analyst Chiara Battistini said in a note.
(Reporting by Helen Reid, Additional reporting by Alessandro Parodi, Editing by Louise Heavens)
