PARIS, April 14 (Reuters) - Sales at Kering's Italian flagship brand Gucci dropped by 8% in the first quarter from the previous year, the 33 billion euro ($39 billion) fashion group said on Tuesday in what it called a "first step" in its recovery.
Gucci's 1.35 billion euro ($1.59 billion) sales from January to March were slightly below analyst forecasts, with the drop marking the 11th straight quarterly decline. A Visible Alpha analyst consensus for revenues projected around 1.37 billion euros.
The
result, days before Kering CEO Luca de Meo is due to unveil his strategic plan to turn around the group's fortunes, serves as a reminder of the steep challenge ahead for the storied fashion house and controlling shareholder, the French Pinault family.
Investors are pinning hopes on de Meo's ability to find a recipe for success amid a jittery market and rapidly shifting trends, though most analysts expect Gucci to only return to growth this fall.
Kering's shares are down about 8% this year.
IRAN WAR COMPLICATES WIDER LUXURY REVIVAL
Kering's nascent turnaround has been complicated further by the Iran war and fragile consumer confidence.
The Middle East conflict shaved off 1% of overall growth at the group level, with a similar level at Gucci, said finance chief Armelle Poulou. This was in line with comments made by Kering's larger rival LVMH on Monday.
LVMH said fewer rich Gulf shoppers were going to local shopping malls or travelling to Europe to splash out, dragging down its shares on Tuesday.
Kering group sales, including other smaller brands like Yves Saint Laurent and jeweller Boucheron, were flat year-on-year when adjusted for currency swings, above an analyst expectation of a 5.8% decline, lifted by strong jewellery and eyewear sales.
The first styles from Georgian fashion designer Demna, who joined Gucci from sister brand Balenciaga last year, have entered stores in recent months, with hopes that those can start to boost its sales.
The brand saw some improvement in key market China, even though it was still negative, Poulou said, while trends in the United States improved significantly. Poulou did not give further details.
De Meo, who took the reins last September, has moved fast to shore up Kering's balance sheet through asset sales, deepened an alliance with cosmetics giant L'Oreal and looked to untangle the group's once unwieldy governance structure.
For investors, the focus is now shifting to whether there are tangible signs that Gucci's revival is on track after de Meo called last quarter's 10% sales drop a possible turning point in a fragile recovery.
($1 = 0.8472 euros)
(Reporting by Tassilo Hummel; Editing by Emelia Sithole-Matarise)
