Luxury Fashion Giant’s Sales PLUMMET, Canary In The Coal Mine?

Luxury fashion brands and the broader retail space are in trouble.

According to new reports, luxury fashion giant Gucci is projected to experience a 20% downturn in sales for quarter one of 2024.

Driving the sales slump is the slowing Chinese economy, which is facing widespread economic issues—most notably in its commercial real estate sector.

During times of economic downturn, the fat is trimmed, and the least important things are the first to be cut.

Knowing this, Gucci’s sales slump may represent a canary in the coal mine—an early warning sign that the global economy is in dire straits. Longbow, a financial and investment page, presented the data:

“House of Gucci. Kering PPRUY, its owner, said Gucci sales will be down -20% in 1Q24 because of slow Asia-Pacific sales.

When other houses like LVMH are not seeing this sort of decline, investors get out. More than 7 bn euros left the stock.

Gucci is about half of Kering’s sales and represents around 70% of OP profit, so they’ve got to turn this ship around. Also, it’s got to be discouraging when all your friends are partying, per the chart below.”

House of Gucci. Kering $PPRUY, its owner, said Gucci sales will be down -20% in 1Q24 because of slow Asia-Pacific sales. When other houses like LVMH are not seeing this sort of decline, investors get out. More than 7 bn euros left the stock. Gucci is about half of Kering’s sales… pic.twitter.com/wnf25lLwE4

— Longbow (@myLongbow) March 20, 2024

Fashion giant Kering (parent of Gucci, YSL, Balenciaga) plunged as much as 20% after the company warned of a steep drop in sales at its Gucci brand, notably in China

— zerohedge (@zerohedge) March 20, 2024

Fashion Network explained the cause of the fallout:

Rising unemployment and a property downturn have hurt consumer confidence, while deflationary pressures are fueling concern about growth in one of the world’s largest consumer markets.

The bar to entice Chinese shoppers has therefore risen. Gucci has seen a significant drop in Chinese online sales in recent months — including from its official website and e-commerce platform on Tmall, said a person familiar with the situation who asked not to be identified discussing confidential matters.

Reuters writes: “The pressure is on Gucci CEO Jean-François Palus to prove he has the right touch.”

From @Breakingviews: Kering shares tanked after it forecast a near 20% sales drop at star brand Gucci, whose revamp could be more complicated than expected. The pressure is on Gucci CEO Jean-François Palus to prove he has the right touch, says @LJucca https://t.co/nnl1N9qRrD pic.twitter.com/3d4NnTPEXE

— Reuters (@Reuters) March 22, 2024

Gucci owner Kering issues profit warning after China sales slump https://t.co/fA6qFASl83

— Guardian Money (@guardianmoney) March 20, 2024

Bloomberg claimed:

“Consumers’ budgets are strained,” said Scott Friedman, chief credit officer at credit-rating and consulting firm Pulse Ratings.

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Distress at budget chains is partly because the discounters’ core customers — low-income households — are cherry-picking what they purchase to save as much money as possible, he said.