Kering warns of 10% 1st-quarter revenue drop, led by Gucci

By Mimosa Spencer

(Reuters) -Luxury goods group Kering warned on Tuesday that its first-quarter sales are likely to drop by around 10%, weighed down by star label Gucci, knocking back hopes that it had stemmed sales declines.

Citing a "steeper sales drop" at Gucci in the Asia-Pacific region, the group said the fashion brand's comparable quarterly revenue is projected to slide by nearly 20% year-on-year.

Kering in February announced plans to invest in Gucci this year, with margins likely to be dented as a result.

Early products from Gucci's Ancora collection, the first designs from new creative director Sabato de Sarno and which have been in some stores since mid-February, have been well received, the company said on Tuesday.

Initial market reaction will likely be negative, said RBC analyst Piral Dadhania, citing a consensus estimate for a 3% decline over the quarter.

"However, with Gucci in the early stages of its turnaround, and with new product scaling up over the coming months, we believe more time is needed to assess customer reaction."

Gucci, which accounts for half of the French group's sales and over two-thirds of operating profit, fell behind rivals over the past two years, prompting a broad management reshuffle in the group and the recruitment of de Sarno.

The label has been focusing on products at the higher end, and sales at Gucci were down 4% in the fourth quarter, year-on-year, compared with a 7% decline in the third quarter.

The group is to report first-quarter sales on April 23.

(Reporting by Stéphanie Hamel and Mimosa Spencer; Editing by David Goodman and Leslie Adler)