French luxury group Kering(PRTP.PA) reported a bigger-than-expected drop in third quarter sales, underperforming major rivals as its top brand Gucci and other fashion labels all suffered from a slowing appetite for high-end clothes and accessories.
The French luxury group, which also owns Yves Saint Laurent, Balenciaga and Bottega Veneta, said on Tuesday that sales for the third quarter came in at 4.46 billion euros ($4.72 billion), a 9% drop at constant currencies and scope, below consensus expectations for a 6% decline.
Gucci, which accounts for over a half of Kering's annual sales and is in a middle of a revamp following a disappointing performance over the past two years, saw a fall in sales of around 7%.
But revenues at smaller brands that until recently had enjoyed stellar growth also declined in the quarter, with Saint Laurent posting a 12% fall and Bottega Veneta down 7%.
Beyond worsening macroeconomic conditions, the company's performance reflected Kering's move to take distribution in house by reducing sales through wholesale channels in a bid to cut on promotions and move its labels upmarket, deputy CEO Jean-Marc Duplaix told reporters.
Rising inflation and economic uncertainty have curbed shoppers' appetite for luxury after years of blockbuster demand, prompting investors to cut their exposure to the industry and trim forecasts.
But Kering is doing worse than rivals.
Kering has undertaken a sweeping overhaul aimed at reviving Gucci, which has struggled to capitalise on the strong post-pandemic rebound in luxury goods sales and lost ground to rivals like LVMH's Dior and Louis Vuitton.
It reshuffled the brand's top management and appointed a new creative director, who unveiled a style reset on a Milan runway in September.
The minimalist looks, which marked a departure from the eccentric styles that had fallen out of fashion, especially with younger Chinese, will not hit stores before early next year.
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