French luxury conglomerate Kering revealed a 10% decline in first-quarter sales on Tuesday, with its flagship brand Gucci experiencing a downturn attributed to subdued demand in

Asia amid a brand transformation.

The group's revenue for the first three months of the year amounted to 4.5 billion euros ($4.82 billion), marking a 10% decrease on a comparable basis. This decline, coupled with ongoing investments in brand development, is expected to significantly impact the company's first-half operating profit.

Concerns arose within the luxury industry following Kering's March 19 warning of an anticipated 10% drop in sales for the period, particularly regarding the recovery of the Chinese market, historically pivotal for Gucci. Factors such as a property crisis and elevated youth unemployment in China have contributed to this uncertainty.

Gucci, which constitutes half of Kering's sales and two-thirds of its profit, faced an 18% decrease in sales during the first quarter, a notable deterioration compared to the 4% decline in the preceding quarter.

Despite these challenges, Kering reaffirmed its commitment to investing in Gucci throughout the year, albeit at the cost of potential margin impacts. The brand's strategic shift towards upscale positioning, emphasizing timeless leather goods, has commenced with the introduction of the new Ancora collection under the direction of creative lead Sabato de Sarno. Initial products from this collection, such as the glossy Jackie bags and platform loafers, have garnered positive reception.

Following Kering's announcement, the company's shares experienced an 18% decline since March 19. In comparison, competitors such as LVMH and Hermes saw decreases of 7.5% and 2.8%, respectively, during the same period. Photo by Sardaka, Wikimedia commons.