Yahoo Finance Kering shares slump after the Gucci owner warns of H1 operating profit drop
PARIS (Reuters) — Kering's shares slumped on Wednesday, after the French luxury goods company warned it expected a 40% to 45% plunge in first-half operating profit.
Kering shares were down almost 8% in early session trading, dragging down slightly the shares of its French rivals LVMH and Hermes.
Late on Tuesday, Kering warned of the likely drop in first-half operating profit as it also reported that first-quarter sales had declined as wealthy shoppers curbed spending on products from its star label Gucci.
Kering's sales for the three months ending in March were down 10% on a comparable basis at 4.5 billion euros ($4.8 billion).
Kering had warned on March 19 that sales over the period were likely to drop by around 10%, dashing hopes it had stemmed sales declines at Gucci, the century-old Italian fashion house which accounts for half of group sales and two-thirds of profit.
The warning prompted concern in the luxury sector about prospects for China's rebound - traditionally Gucci's most coveted market - which has been clouded by a property crisis and high youth unemployment.
Sales at Gucci in the first quarter were down 18%, significantly worse than the 4% decline in the prior quarter, the company reported.
The revenue decline and ongoing investment needed in the brand will hurt first half profits, with Gucci not seeing much improvement in the second quarter, company executives told analysts on a call.
The extent of the anticipated drop in first half profit was larger than expected, however.
"We think it is too early to turn more constructive on this turnaround journey," wrote analysts at JP Morgan, which also cut its price target on Kering shares.
(Reporting by Mimosa Spencer; Editing by Sudip Kar-Gupta)
