Kering, owner of Gucci and Saint Laurent, warned on Wednesday (Jul 24) that its operating income could fall by as much as 30 per cent in the second half of the year, compounding the woes at the French luxury company.

One of the biggest names in luxury, Kering was a laggard compared to peers LVMH and Hermes during the pandemic-era boom and its performance has only worsened as the industry as a whole has slowed.

Kering said sales at Gucci, its biggest brand accounting for half of revenues and two-thirds of profits, have fallen further with a turnround under a new designer having so far failed to gain traction.

Second-quarter sales at top brand Gucci fell 19 per cent on a like-for-like basis compared to one year earlier, including “a continuing marked decrease in Asia-Pacific”, Kering said.

Group sales in the three months to Jun 30 dropped 11 per cent to €4.5 billion (US$4.88 billion; S$6.56 billion), and fell short of analysts’ expectations.

Operating income dropped 42 per cent in the first half of the year to €1.58 billion, in line with expectations compiled by Reuters after the company guided sharply lower at its last results.

A recurring operating margin of 17.5 per cent in the first half was significantly lower than during the same period last year, which the company attributed to “negative operational leverage”.

“In a challenging market environment, which adds pressure on our top line and profitability, we are working assiduously to create the conditions for a return to growth . . . While the current context might impact the pace of our execution, our determination and confidence are stronger than ever,” said Kering chief executive Francois-Henri Pinault.

Kering has said it is continuing to prioritise long-term investment in its brands despite strained demand.