Profit fears as Gucci sales plunge

French luxury group Kering, which owns Gucci brand, warned that first-half profit might plunge up to 45 percent due to decreasing demand from mainland Chinese.

Its first-quarter sales declined as wealthy shoppers curbed spending on products from its star label Gucci. Sales were down 10 percent on a comparable basis at 4.5 billion euros (HK$37.66 billion).

The warning prompted concern in the luxury sector about prospects for China's rebound - traditionally Gucci's most coveted market - which has been clouded by a property crisis and high youth joblessness.

Sales at Gucci were down 18 percent, significantly worse than the 4 percent decline in final quarter of last year.

The revenue decline and ongoing investment needed in the brand will hurt first-half profits, with Gucci not seeing much improvement in the second quarter, executives told analysts on a call.

The extent of the anticipated drop in first-half profit was larger than expected.

"It is not surprising that brands in transition may be experiencing bigger difficulties in a softening demand environment, as consumers concentrate their spend on must-have brands," analysts at Bernstein said in a note.

"The Chinese market right now is fairly polarized between appetite from clients for the very high end or more affordable products, and Gucci, more positioned in the middle, is therefore not benefiting from this polarization," chief financial officer Armelle Poulou said.

Shares of Kering plunged 9.3 percent at one stage.