The luxury goods market has always been characterized by fierce competition, and Gucci has often been at the forefront of this battleRecently, however, the brand has faced a staggering downturn in quarterly sales that has raised eyebrows and alarm bells alikeThis downturn has impacted its parent company, Kering Group, weighing heavily on the overall performance of the conglomerate and complicating its struggle against persistent low demand.

On Tuesday, Kering published its annual performance report, revealing that Gucci’s sales continue to languishNumbers from the fourth quarter showed a shocking comparable sales drop of 24%, significantly surpassing analysts' predictions of a 22% declineWhen looking at the year as a whole, Gucci's revenue plummeted by an astonishing 51%, amounting to just €1.6 billionSuch dismal sales figures have directly contributed to Kering’s overall downturn, with the company reporting an organic sales decrease of 12% in the last quarter, down to €4.39 billionUnderlining the severity of the situation, the group's recurring operating profit fell by a staggering 46% to only €2.55 billion, marking a low not seen since 2016. With Gucci accounting for nearly two-thirds of Kering's profits, the impact of its performance on the conglomerate’s financial health is undeniable.

In terms of stock performance, Kering's shares have seen a modest increase of 2.5% this yearHowever, when compared to the peak in 2021, they remain approximately 70% downThis stark contrast is evident when compared to competitors like LVMH and Hermès, whose stock prices have surged by around 8% and 18%, respectively, this yearKering's sluggish stock performance not only reflects market concern over its financials but also highlights its growing disadvantages in the luxury market.

The troubles faced by Kering are not isolated incidents; rather, they signify challenges faced across the entire luxury sector

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Even industry giants like LVMH are feeling the effects of slowing demand for high-end bags and apparelMeanwhile, Hermès, often viewed as the most resilient of luxury brands, is set to report its earnings this Friday, drawing keen interest from both industry insiders and consumers alikeIn the broader context of weakening demand for luxury goods, whether Hermès can maintain its stronghold has become a critical question in current discussions.

To revive the Gucci brand, Kering has been proactive in its approach, attempting various strategies, one of which has included a shift in design leadershipUnfortunately, these efforts have yet to show significant positive effectsJust last week, Kering announced the departure of Gucci’s designer, Sabato De Sarno, who held the position for merely two yearsDe Sarno’s minimalist design approach seemed to lack resonance with consumers, and the market's feedback was rather lukewarmThis resignation stands as the new CEO Stefano Cantino's first major decision in his tenureReflecting on Gucci’s rich legacy reveals that periods of bold, innovative designs have historically led to stronger market performanceConsequently, Kering must prioritize finding a designer who can drive trends and connect with consumer needs to breathe new life into the Gucci brand.

In light of current challenges, Kering is already implementing measures to stabilize its situationCFO Armelle Poulou highlighted that, despite continued negative growth in the Chinese market, there has been a slight uptick in performance in both the Chinese and North American markets in the fourth quarter compared to the thirdThis flicker of hope offers a glimmer of optimism for KeringTo contain costs, the group has initiated hiring freezes and supply chain cost-cutting measures

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