Kering’s Jewelry Brands a Bright Spot in Tough Q1

Paris—Kering posted declining sales in the first quarter as its star brand Gucci continues to struggle.

The luxury titan reported first-quarter revenue of €4.5 billion ($4.8 billion), down 11 percent year-over-year (10 percent on a comparable basis).

The company had warned investors in a preliminary results announcement in March about its expected revenue drop, attributing it to a steep sales drop at Gucci.

The brand performed poorly, particularly in the Asia-Pacific region, with first-quarter revenue falling 21 percent (18 percent on a comparable basis).

“Kering’s performance worsened considerably in the first quarter,” said Kering CEO François-Henri Pinault.

“While we had anticipated a challenging start to the year, sluggish market conditions, notably in China, and the strategic repositioning of certain of our houses, starting with Gucci, exacerbated downward pressures on our topline.” 

However, its jewelry houses, which include Boucheron and Pomellato, put on a strong performance, said Kering, with revenue up double digits in the quarter.

The company’s jewelry brands fall into its “other houses” division, alongside Alexander McQueen and Balenciaga.

For the first quarter, revenue in the division totaled €824 million ($882 million), down 7 percent year-over-year (6 percent on a comparable basis).

Boucheron and Pomellato performed especially well in the Asia-Pacific region and Japan, said Kering Chief Financial Officer Armelle Poulou on the company’s earnings call Tuesday afternoon.

Boucheron led the charge as it celebrated the 20th anniversary of its “Quatre” collection, while Pomellato debuted its “Pom Pom Dot” reversible jewels collection.

Qeelin continued to expand its presence, opening four stores.

Revenue from Kering’s directly operated stores, which includes its e-commerce sites, was down 11 percent year-over-year on a comparable basis, impacted by lower foot traffic.

Revenue in the wholesale and “other” segment was down 7 percent on a comparable basis, as the company streamlines its distribution.

Looking at its performance by region, Kering’s sales in North America fell 11 percent year-over-year in the first quarter.

North America was Kering’s third-largest market by revenue percentage in the first quarter, accounting for 22 percent of total revenue, up from 21 percent in Q1 2023. 

Japan saw the strongest growth with quarterly revenue up 16 percent.

The Asia-Pacific region saw the steepest decline, down 19 percent, which Kering attributed to “challenging, volatile market conditions.” 

Sales in Western Europe were down 9 percent.

Kering operated 1,781 stores as of Q1, up from 1,771 at the end of the previous fiscal year. 

Looking to the year ahead, the company expects it will continue to struggle in the first half.

“The first half of the year is proving even tougher than we expected,” said Poulou.

Kering will continue to invest in its brands, she said, but will be more selective and demanding about a return on investment.

The company is expecting a sharp drop in first-half profit, forecasting a decline of 40 to 45 percent in first-half operating income.

“All of us are working tirelessly to see Kering through the current challenges and rebuild a solid platform for enduring growth,” said Pinault.