Consumer sentiment in the world’s second-largest economy has soured due to a prolonged downturn in the real estate market and the resulting economic slowdown. This trend has significantly impacted Gucci’s sales, also affecting the shares of other luxury brands.

Gucci is one of the most iconic and recognized luxury brands in the world, renowned for its elegance, innovation, and bold style. Founded in 1921 by Guccio Gucci in Florence, Italy, the brand began as a small leather goods shop and gradually expanded its reach to become a global leader in the luxury fashion market.

Over the years, Gucci has built a distinctive reputation for its avant-garde fashion creations, stunning handbags, elegant shoes, high-quality accessories, and exclusive fragrances. The brand is celebrated for its daring designs, iconic patterns (like the GG monogram), vibrant colors, and an aesthetic that balances tradition with contemporary flair.

Gucci is also known for its collaborations with renowned artists and designers, resulting in unique and collectible collections. Under the creative direction of Alessandro Michele since 2015, Gucci has undergone a dramatic transformation, revitalizing its image and positioning itself as one of the most influential brands in the fashion industry.

In addition to its fashion collections, Gucci has expanded its horizons to include a variety of products such as jewelry, watches, eyewear, beauty products, and home decor. The brand is also recognized for its commitment to sustainability and social responsibility, implementing initiatives to reduce its environmental impact and promote ethical practices across its supply chain.

Gucci maintains a strong global presence, with stores in some of the world’s most luxurious cities and a robust online presence. Its influence on pop culture, social media, and the fashion scene has made it one of the most desired and admired brands by consumers worldwide. In short, Gucci remains a benchmark for luxury, innovation, and timeless style in the contemporary fashion industry.

Luxury brands represent an exclusive and distinct sector of the market that offers high-quality products and experiences often associated with prestige, exclusivity, and status. These brands span various sectors, including fashion, accessories, jewelry, cosmetics, automobiles, travel, and hospitality.

Luxury products are often crafted with the highest-quality materials and meticulous craftsmanship. Every detail is carefully considered to ensure excellence. Luxury brands frequently produce limited quantities of products, creating a sense of exclusivity and rarity that appeals to consumers seeking to stand out and own unique items.

Many luxury brands have a rich history and significant heritage that dates back decades or even centuries. This tradition adds value to the brand and creates an emotional connection with consumers.

Design is a fundamental part of a luxury brand’s identity. Many brands have distinctive and recognizable styles that reflect their unique aesthetics and creative vision. Owning luxury products is often associated with high social status and prestige. These brands have the power to elevate the image and self-esteem of their customers.

Some of the most renowned luxury brands include Louis Vuitton, Chanel, Gucci, Hermès, Rolex, Cartier, Ferrari, Rolls-Royce, Ritz-Carlton, and Four Seasons. These brands not only offer high-quality products but also create exclusive and unforgettable experiences for their clients, contributing to their longevity and success in the luxury market.

In Europe, on Wednesday (20th), a decline in the shares of these brands was observed, with Kering—owner of brands such as Gucci, Saint Laurent, Bottega Veneta, and Balenciaga—suffering a drop of up to 15% in Paris. Meanwhile, LVMH, the second most valuable company in Europe and owner of brands like Louis Vuitton and Tiffany & Co., recorded a decline of over 3%.

Swiss company Richemont, responsible for producing Piaget watches, Montblanc pens, and Van Cleef & Arpels jewelry, was also impacted, with a 3% drop. In London, iconic British brand Burberry, which had already warned of lower profits in January, experienced a drop of up to 6%.

After years of prosperity following the pandemic, luxury goods companies are now facing weaker demand in one of their key markets: China. The decline in consumer sentiment in this crucial economy is attributed to the ongoing downturn in the real estate market and the subsequent economic slowdown.

In a surprising trading update published on Tuesday, Kering revealed that sales of its flagship brand, Gucci, are estimated to have suffered a nearly 20% year-on-year decline in the first quarter, driven by a sharp drop in the Asia-Pacific region. Overall, Kering’s sales are estimated to have fallen by 10% during this period.

“The magnitude of this warning is shocking and is raising fresh concerns about the state of demand among high-end consumers,” commented Adam Crisafulli, a former JPMorgan analyst and founder of market intelligence firm Vital Knowledge.

“Gucci has faced some company-specific issues over several quarters, but this update will further heighten concerns about consumer spending and the state of China’s economy,” he added.

China has been grappling with a prolonged period of deflation, with consumer prices stagnating or falling in recent months. The Consumer Price Index turned positive for the first time in six months in February, largely driven by a seasonal uptick in Lunar New Year-related purchases.

Kering’s efforts to revitalize its fortunes have included a series of comprehensive strategies, ranging from reevaluating its marketing approach to overhauling its product lines and shopping experiences. The company has focused on strengthening Gucci’s appeal in key markets, including China, by implementing targeted marketing campaigns and tailoring its collections to suit local consumer preferences.

Additionally, Kering has invested significantly in innovation and digitalization, aiming to enhance the online customer experience and bolster its e-commerce presence. Strategic partnerships, creative collaborations, and social responsibility initiatives have also been prioritized as part of the company’s effort to rebuild its position in the global luxury market.

With Gucci playing a crucial role in its business strategy, Kering is committed to ensuring the Italian brand remains relevant and attractive to consumers in an increasingly competitive environment. The company acknowledges the importance of adapting to changing consumer preferences and the evolving economic landscape and is determined to secure the continued success of Gucci and its other luxury brands under its management.