Gucci, the flagship brand of French luxury group Kering, reported a 4% drop in second-quarter sales to €1.4 billion on Thursday. But a 9% rise in the United States helped the company beat analyst expectations, offering an early sign that CEO Luca De Meo's turnaround strategy may be gaining traction.
What happened
The sales decline was Gucci's 12th consecutive quarterly drop, according to Reuters, as the brand has struggled with steep price hikes and shifting consumer tastes over the past three years. However, the 4% fall was an improvement from the 8% decline in the first quarter and came in above the €1.37 billion that analysts had forecast, according to Visible Alpha.
Kering pointed to faster growth in the US and better performance in newer product lines as key drivers. The US market, which had been a weak spot for many luxury brands in recent quarters, showed renewed strength for Gucci, with sales there rising 9% year-over-year.
The broader luxury sector has been under pressure as inflation-weary consumers, particularly in China and Europe, have pulled back on high-end spending. But the US bounce for Gucci suggests that American shoppers may be returning to the brand, even as other regions remain sluggish.
Why it matters for investors
Gucci is Kering's most important brand, accounting for roughly half of the group's revenue and an even larger share of its profits. For months, investors have been watching closely to see whether De Meo's plan to revive the label — which includes refreshing product lines, adjusting pricing, and refocusing marketing — would start to show results.
The better-than-expected quarter does not mean Gucci is out of the woods. Sales are still roughly half what they were three years ago, and the brand faces intense competition from rivals like LVMH's Louis Vuitton and Dior, as well as from smaller luxury houses that have gained share. But the improvement in the US and the narrowing of the decline offer some reassurance that the turnaround may be on track.
For everyday investors, the key takeaway is that luxury stocks remain sensitive to shifts in consumer confidence and spending patterns, especially in the US and China. A recovery in US luxury demand could benefit not just Kering but also other names in the sector, such as LVMH, which recently reported that US shoppers helped power its sales growth even as European demand stalled. You can read more about that in our article on LVMH's US-driven growth.
What to watch next
Investors will be looking for signs that Gucci's momentum can be sustained. Key areas to watch include the performance of new collections, any further improvement in the US market, and whether demand in China — a critical market for luxury goods — begins to recover. Kering's broader portfolio, which includes brands like Saint Laurent and Bottega Veneta, will also be in focus when the group reports full results later this year.
The luxury sector as a whole has been navigating a period of uncertainty, with some analysts warning that the recovery could be uneven. But for now, Gucci's US bounce has given Kering's turnaround plan a welcome nudge, and investors will be hoping that the trend continues.
