The slowdown shows no signs of stopping. Amid geopolitical tensions and uncertain global demand, the luxury sector is under pressure again: Gucci retreats further, Hermès shows unexpected cracks, and the entire segment pays the price of a system heavily dependent on tourism and international markets.
GUCCI, THE RECOVERY REMAINS UNCERTAIN
Gucci sales fell by 8% in the first quarter, marking the eleventh consecutive decline and falling short of analysts’ expectations. The brand, which generates about 60% of Kering’s profits, recorded revenues of 1.35 billion euros, slightly below consensus estimates. The result, notes Reuters, highlights the difficulties in reviving the brand’s appeal, just as the new CEO Luca de Meo prepares to present the strategic plan for the 33 billion euro group.
Although the company continues to indicate Gucci as an “absolute priority” and speaks of an “overall relaunch underway,” the path appears gradual and uncertain in a complex macroeconomic context. Investors therefore remain cautious, with Kering shares today falling up to 10% after the results, heading toward the worst session in over a year.
THE WEIGHT OF WAR AND DECLINING TOURISM
A significant factor is the conflict in the Middle East, which has reduced local consumer spending and slowed international tourist flows. Kering recorded an 11% drop in retail sales in the region in the first quarter, with an overall impact of 1% on quarterly revenues and 3% in March alone.
The slowdown in travel is also reflected in the duty-free channel, traditionally one of the most profitable for the sector. Temporary airport closures and the collapse of air traffic are penalizing sales of high-end products, exposing a structural vulnerability for luxury groups that rely on Gulf hubs.
European tourism is also affected by the situation: fewer visitors to Paris and London translate into lower luxury goods purchases, with direct effects on brand revenues.
THE BRAND’S STRUCTURAL CHALLENGES
Beyond the external context, Gucci continues to face internal challenges. Years of aggressive price increases, stylistic changes, and frequent managerial reorganizations have alienated part of the clientele, leading to a halving of quarterly sales compared to 2023 levels.
The new creative director Demna Gvasalia and CEO Francesca Bellettini are called upon to reverse the trend, while the first products of the new artistic direction are starting to arrive in stores and generate initial interest. However, difficulties persist in key markets such as China, where sales remain down despite some signs of improvement.
HERMÈS HOLDS UP, BUT LOSES GROUND
Hermès, considered so far the most resilient in the sector, also shows signs of slowdown. Sales grew by 5.6% at constant exchange rates in the quarter, below analysts’ expectations, while the stock lost 14% at the open, hitting lows not seen in over three years.
In particular, Reuters reports, the group suffered a 6% decline in the Middle East and a sharp halt in sales in March, after double-digit growth in the first two months of the year. In luxury malls in Dubai and the Gulf, sales plummeted by up to 40% in the same month.
THE IMPACT ON TRAVEL RETAIL
The main luxury groups converge in reporting a slowdown linked to the geopolitical context and the contraction of tourist flows, with measurable effects on quarterly sales. The conglomerate Lvmh, writes Reuters, indicated that the war in the Middle East reduced the group’s growth by 3 percentage points in March and by 1 percentage point over the entire quarter, with an impact of about 2 points on the selective retail division, which includes DFS and Sephora.
Travel retail emerges as one of the most exposed channels: the 74 billion dollar segment has indeed been affected by the collapse of international flights in the first half of March and the temporary closures of several airports in the Gulf region. Flight cancellations from the Middle East, the news agency continues, reached 65% at the beginning of the month, then gradually decreased, while the overall number of scheduled connections also declined. Air traffic dynamics directly affect the airport luxury distribution chain, where groups like DFS and Avolta operate, forced to reorganize stocks and stores in response to the reduced passenger flow and partial closures of Gulf hubs.
