logo
Gucci-owner Kering's Shares Down 5% after Q1 Sales Disappoint

Gucci-owner Kering's Shares Down 5% after Q1 Sales Disappoint

Asharq Al-Awsat24-04-2025

Shares of Kering traded down 5% in European morning trade on Thursday, after the group reported a first-quarter sales drop that was worse than analysts' expectations.
Kering after the market close on Wednesday posted a 14% decline in sales, with a 25% drop at flagship label Gucci, the latest signal the luxury sector faces another tough year.
The sales report confirmed "a weakening backdrop" since February, said analysts at Jefferies, noting "the uncertainties around reigniting Gucci's desirability remain plentiful".
The brand, which accounts for around two-thirds of group profits, is betting on in-house talent Demna to revive sales, but new designs will only arrive gradually at the end of the year, Reuters reported.
The French luxury group flagged worsening sales in North America and Western Europe and said it expected sales to continue to fall in double digits, percentage-wise, in the second quarter, before starting to improve.
This leaves the "heavy lifting" for the second half, which will likely depend on a recovery in Chinese demand, noted analysts at Bernstein.
Prospects for the luxury industry, which had pinned hopes on growth from the United States to help pull it out of a slump as the Chinese market remains weak, have been darkened by recession fears prompted by US President Donald Trump's tariff announcements.
As trade tensions have risen, Bellwether LVMH has fallen 23% and Burberry and Kering have both lost 30% since the start of the year. Hermes and Cartier-owner Richemont, viewed by analysts as better insulated from economic downturns because of their wealthier clientele, are up 1% and 3%, respectively.
First-quarter reports from Kering's larger rivals last week also reflected the sector's slowdown and disappointed investors, with sales at LVMH's fashion and leather goods division down 5% while Hermes, which routinely outpaces expectations with double-digit growth, posted a 7% rise.
Analysts at Deutsche Bank on Thursday lowered their 2025 earnings per share estimate for Kering this year by 13% to 8.65 euros ($9.84), citing the company's cautious outlook for the first half, and noting the slowdown in all regions except Asia was slightly worse than peers.
TD Cowen lowered sales forecasts for Gucci this year by 15% to a 20% decline.
The analysts added that Gucci, as well as another Kering label Yves Saint Laurent, were expected to be slower to raise prices to offset tariffs than peers. The Kering labels have a broader base of less-wealthy clients who are more reluctant to splash out in a choppy economic environment.
LVMH, meanwhile, has raised prices of some Louis Vuitton handbags and leather goods by around 4% according to Bernstein and Barclays, while Hermes said it will pass on the full effect of tariffs to shoppers in the United States on May 1.
US tariffs could include a 20% charge on European fashion and leather goods and 31% for Swiss-produced watches if fully applied, but Trump earlier this month paused most of his tariffs for 90 days, setting a general 10% duty rate instead.
The price hikes from Vuitton are "more than enough" to offset even 20% tariffs, said Bernstein.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

World Bank slashes global growth forecast as trade tensions bite
World Bank slashes global growth forecast as trade tensions bite

Arab News

time36 minutes ago

  • Arab News

World Bank slashes global growth forecast as trade tensions bite

WASHINGTON: The World Bank on Tuesday slashed its global growth forecast for 2025 by 0.4 percentage point to 2.3 percent, saying that higher tariffs and heightened uncertainty posed a 'significant headwind' for nearly all economies. In its twice-yearly Global Economic Prospects report, the bank lowered its forecasts for nearly 70 percent of all economies — including the United States, China and Europe, as well as six emerging market regions — from the levels it projected just six months ago before US President Donald Trump took office. Trump has upended global trade with a series of on-again, off-again tariff hikes that have increased the effective US tariff rate from below 3 percent to the mid-teens — its highest level in almost a century — and triggered retaliation by China and other countries. The World Bank is the latest body to cut its growth forecast as a result of Trump's erratic trade policies, although US officials insist the negative consequences will be offset by a surge in investment and still-to-be approved tax cuts. The bank stopped short of forecasting a recession, but said global economic growth this year would be its weakest outside of a recession since 2008. By 2027, global gross domestic product growth was expected to average just 2.5 percent, the slowest pace of any decade since the 1960s. The report forecast that global trade would grow by 1.8 percent in 2025, down from 3.4 percent in 2024 and roughly a third of its 5.9 percent level in the 2000s. The forecast is based on tariffs in effect as of late May, including a 10 percent US tariff on imports from most countries. It excludes increases announced by Trump in April and then postponed until July 9 to allow for negotiations. The bank said global inflation was expected to reach 2.9 percent in 2025, remaining above pre-COVID levels, given tariff increases and tight labor markets. 'Risks to the global outlook remain tilted decidedly to the downside,' the bank wrote. It said its models showed that a further 10-percentage point increase in average US tariffs, on top of the 10 percent rate already implemented, and proportional retaliation by other countries, could shave another 0.5 percentage point off the outlook for 2025. Such an escalation in trade barriers would result 'in global trade seizing up in the second half of this year ... accompanied by a widespread collapse in confidence, surging uncertainty and turmoil in financial markets,' the report said. Nonetheless, it said the risk of a global recession was less than 10 percent. 'FOG ON A RUNWAY' Top officials from the United States and China are meeting in London this week to try to defuse a trade dispute that has widened from tariffs to restrictions over rare earth minerals, threatening a global supply chain shock and slower growth. 'Uncertainty remains a powerful drag, like fog on a runway. It slows investment and clouds the outlook,' World Bank Deputy Chief Economist Ayhan Kose told Reuters in an interview. But he said there were signs of increased dialogue on trade that could help dispel uncertainty, and supply chains were adapting to a new global trade map, not collapsing. Global trade growth could see a modest rebound in 2026 to 2.4 percent, and developments in artificial intelligence could also boost growth, he said. 'We think that eventually the uncertainty will decline,' he said. 'Once the type of fog we have lifts, the trade engine may start running again, but at a slower pace.' Kose said while things could get worse, trade was continuing and China, India and others were still delivering robust growth. Many countries were also discussing new trade partnerships that could pay dividends later, he said. US GROWTH FORECAST CUT SHARPLY The World Bank said the global outlook had 'deteriorated substantially' since January, mainly due to advanced economies, now seen growing by just 1.2 percent, down half a point, after expanding 1.7 percent in 2024. The US forecast was slashed by 0.9 percentage point from its January forecast to 1.4 percent, and the 2026 outlook was lowered by 0.4 percentage point to 1.6 percent. Rising trade barriers, 'record-high uncertainty' and a spike in financial market volatility were expected to weigh on private consumption, trade and investment, it said. Growth estimates in the euro area were cut by 0.3 percentage point to 0.7 percent and in Japan by 0.5 percentage point to 0.7 percent. It said emerging markets and developing economies were expected to grow by 3.8 percent in 2025 versus 4.1 percent in January's forecast. Poor countries would suffer the most, the report said. By 2027 developing economies' per capita GDP would be 6 percent below pre-pandemic levels, and it could take these countries — minus China — two decades to recoup the economic losses of the 2020s. Mexico, heavily dependent on trade with the US, saw its growth forecast cut by 1.3 percentage points to 0.2 percent in 2025. The World Bank left its forecast for China unchanged at 4.5 percent from January, saying Beijing still had monetary and fiscal space to support its economy and stimulate growth.

Hopes rise as US and China hold second day of trade talks
Hopes rise as US and China hold second day of trade talks

Al Arabiya

time3 hours ago

  • Al Arabiya

Hopes rise as US and China hold second day of trade talks

The United States and China began a second day of trade talks on Tuesday, seeking to shore up a shaky tariff truce in a bitter row deepened by export curbs. The gathering of key officials from the world's two biggest economies began Monday in London, after an earlier round of talks in Geneva last month. Stock markets wavered as investors hoped the talks will bring some much-needed calm on trading floors and ease tensions between the economic superpowers. A US Treasury spokesman told AFP on Tuesday the 'talks resumed earlier this' morning. One of US President Donald Trump's top advisers said he expected 'a big, strong handshake' at the end of the talks in the historic Lancaster House, operated by the UK foreign ministry. Trump told reporters at the White House on Monday: 'We are doing well with China. China's not easy.' 'I'm only getting good reports.' The agenda is expected to be dominated by exports of rare earth minerals used in a wide range of things including smartphones, electric vehicle batteries and green technology. 'In Geneva, we had agreed to lower tariffs on them, and they had agreed to release the magnets and rare earths that we need throughout the economy,' Trump's top economic adviser, Kevin Hassett, told CNBC on Monday. But even though Beijing was releasing some supplies, 'it was going a lot slower than some companies believed was optimal,' he added. Still, he said he expected 'a big, strong handshake' at the end of the talks. 'Our expectation is that after the handshake, any export controls from the US will be eased, and the rare earths will be released in volume,' Hassett added. He also said the Trump administration might be willing to ease some recent curbs on tech exports. Concessions? Tensions between Washington and Beijing have heightened since Trump took office in January, with both countries engaging in a tariffs war hiking duties on each other's exports to three figures -- an effective trade embargo. The Geneva pact to cool tensions temporarily brought new US tariffs on Chinese goods down from 145 percent to 30 percent, and Chinese countermeasures from 125 percent to 10 percent. But Trump recently said China had 'totally violated' the deal. 'Investors are willing to grab on to any positive trade headline right now, as this is keeping hopes of a rally alive,' said Kathleen Brooks, research director at trading group XTB. Ipek Ozkardeskaya, senior analyst at the Swissquote Bank, said that although there had been 'no breakthrough' it seemed 'the first day of the second round of negotiations reportedly went relatively well.' 'Rumours are circulating that the US may be willing to make concessions on tech exports in exchange for China easing restrictions on rare earth metal exports,' she said. Rare earth shipments from China to the US have slowed since the tariff war was triggered by Trump's so-called 'Liberation Day' announcements, according to Brooks. The US leader slapped sweeping levies of 10 percent on friend and foe alike, and threatened steeper rates on dozens of economies. The tariffs have already had a sharp effect, with official figures from Beijing showing Chinese exports to the United States in May plunged by 12.7 percent. China is also in talks with other trading partners -- including Japan and South Korea -- to try to build a united front to counter Trump's tariffs. Chinese leader Xi Jinping on Tuesday urged South Korea's new President Lee Jae-myung to work with Beijing to uphold free trade to ensure 'the stability and smooth functioning of global and regional industrial and supply chains.' 'A healthy, stable, and continuously deepening China-South Korea relationship aligns with the trend of the times,' Xi said in a phone call, according to the Xinhua news agency. Chinese Vice Premier He Lifeng is heading the team in London, which included Commerce Minister Wang Wentao and China International Trade Representative Li Chenggang. US Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer are leading the US delegation.

The Biggest Mystery of Elon Musk
The Biggest Mystery of Elon Musk

Asharq Al-Awsat

time6 hours ago

  • Asharq Al-Awsat

The Biggest Mystery of Elon Musk

Must any pair of would-be great men of history always find a path to conflict? Ask Caesar and Pompey, Octavian and Antony, Lennon and McCartney. But the specific thing they fight about is less predictable. I would not have guessed, six months ago, that Elon Musk and Donald Trump's version of the Battle of Actium would be fought over the budget deficit. That's because six months ago I understood Musk's interest in politics, his long march away from Obama-era liberalism and his reinvention of himself as the prince of the very online right, as reflecting two key goals: his newfound desire to defeat cultural progressivism, rooted in the experience of his child's gender transition, and his long-term, career-shaping desire to get human explorers to Mars. These interests reinforced each other. Musk was already moving rightward on cultural issues when his purchase of Twitter, a particular Rubicon, led him to shed the leftward political alliances that once yielded Democratic patronage and support. This strengthened his financial incentives to go all in for Trump and the Republicans, because it was clear that a Kamala Harris administration would be unremittingly hostile to his technological projects. He had already been willing to make all kinds of wild business gambles for those projects, the dream of Mars-bound rockets above all, so placing a stark political bet was second nature. Given that reading of his intentions, I assumed that Musk's role in a second Trump administration would be some combination of first technologist, deregulator in chief and anti-woke crusader — a space and tech focus with a side of culture war. But that isn't what happened. We did get the third role to some extent in some of the ideological justifications for the DOGE campaign against U.S.A.I.D., but Musk wasn't really the point man for the White House's anti-woke battles. Nor did Musk assume a leading role in the administration's deregulatory efforts. That seemed to be part of the initial plan for DOGE, but it went into abeyance when Musk forced out Vivek Ramaswamy. Instead, the Tesla tycoon cast his great project as a budget-cutting effort, draped in the kind of apocalyptic rhetoric about immediate fiscal crises that went out of style on the right when Trump came down the escalator in 2015. The extremity of this rhetoric, paired with the obvious difficulty of achieving trillions of dollars of savings through head-count reductions at federal agencies, led many people to assume that it was all a smoke screen — that DOGE was just a mechanism to help Trump's inner circle understand how to take full control of the executive branch. Certainly, there are people in the White House who appreciate how DOGE helped them see inside the administrative state. But in terms of what Musk himself thought he was doing, I mostly take him at his word: He seemed to have bought into a vision of his role in Washington as a one-man version of the Simpson-Bowles commission but with a mind-set and energy that would enable him to succeed where prior deficit hawks had failed. But I'm very curious as to why he embraced that specific role. Anti-deficit mania was not a big part of the edgelord identity that Musk adopted on social media; on the New Right, deficit issues were seen as fusty, old-guard. Was it just a natural C.E.O.'s reaction to being handed power in D.C. — that the first thing you do after a takeover is try to fix the cash flow? To the extent that drug use reportedly played a role, is there something about ketamine that makes federal budgeting seem unusually alluring? Or did someone convince him that fiscal improvidence was the major impediment to humans becoming a multiplanetary species, the great filter that would prevent our escape into the stars? If so, that someone did us all a disservice. It's not that the deficit is unimportant. But it's a place where Musk has no special competency, and a Silicon Valley tool kit honed in private industry doesn't translate especially well to the political challenge of taming entitlement spending. Clearly, Musk didn't stop caring about the space program: The Trump White House decision (itself a bit of a mystery) to withdraw the nomination of his choice to head NASA seems to have helped tip him over into full opposition to its tax legislation. But in the rhetorical war that he's waging (for now, pending a temporary truce) against his former presidential BFF, Musk is not playing the disappointed futurist, the dynamist let down by populist blunders. He's playing the deficit scold, a position historically occupied by dorks and killjoys. (I've been one of them at times, trust me.) It's a poor platform from which to relaunch his interplanetary ambitions. 'Trump has 3.5 years left as President, but I will be around for 40+ years,' Musk predicted as the feud got hot. My own prediction is that the productivity of those four decades will be amplified if he realizes that fixing the federal deficit is one ambitious project that should be left to someone else. The New York Times

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store