Kering, the company that owns Gucci, saw a steep loss in sales in the first half of the year and a negative projection for the remaining six months of the year, which caused shares of the luxury brand to fall on Thursday.

As markets opened, Kering shares fell as much as 9%, trading at levels last seen in August 2017. At 12:04 p.m. London time, the stock was down 6.74%, reversing some of its losses.

The luxury conglomerate declared late on Wednesday that, in comparison with the same period last year, its income had decreased by 11% in the first half of 2024. The business released a statement stating that the reduction occurred “against the backdrop of a slowing market in most regions except Japan.”

“There was a marked deceleration in China, while trends did not improve greatly in North America and Europe,” Kering added.

When foreign exchange impacts are taken out of the picture, group revenue in Japan increased by 22% in the first half of the year, while the print for the Asian total that does not include Japan fell by 20%.

In addition, the luxury company stated that it anticipated a 30% annual decline in recurring operating profit in the second half of 2024 due to “uncertainties weighing on the evolution of demand from luxury consumers.”

According to Kering, recurring operating profit decreased by 42% in the first half of the year, although this was expected given the forecast given when the company released its first-quarter results earlier in the year.

Kering is the owner of several upscale brands, such as Bottega Veneta, Yves Saint Laurent, and Gucci. Among these brands, Gucci had the worse first-half performance, with a comparable revenue decline of 18%.

“At this time, there are no clear indications that Gucci is making a comeback,” senior luxury analyst at Bernstein, Luca Solca, stated on Thursday. The performance of the brand will be put to the test by consumer response to new handbag lines that are scheduled to launch in the second part of the year, he continued.

“This could be the worst thing that can happen if the response is favourable. If not, Solca remarked, “I suppose Kering will have to adopt drastic measures in an effort to preserve the bottom line.”

Following a boom in 2021 during the Covid-19 epidemic, Gucci has been having financial difficulties recently due to rising consumer spending pressure and the rise of the “quiet luxury” style.

Following the announcement earlier this week of lower-than-expected sales by the largest luxury company in the world, LVMH, Kering is the most recent in a string of premium businesses to see reductions.

According to Solca, Kering had previously used a successful approach that catered to aspirational customers and included streetwear. However, there has been a downturn in the middle class and among aspirational consumers, and streetwear has lost some of its appeal. This presents a “double whammy” for the business, according to him.

(Adapted from NBCNewYork.com)