July 26, 2019 / 7:24 AM / 3 months ago

UPDATE 1-Kering shares slump as Gucci shows signs of slowdown

(Adds more detail and background)

PARIS, July 26 (Reuters) - Kering’s shares slumped on Friday as analysts honed in on signs of a slowdown at the French luxury group’s Gucci brand to knock down the stock from record highs reached earlier this year.

Kering shares were down 8% in early session trading, although the stock - which hit a record high in April - remains up around 14% so far in 2019.

Kering’s results late on Thursday showed a slower-than-expected rise in second-quarter sales at Gucci.

“Gucci’s slowdown in the USA exacerbated from 5% in the first quarter of 2019 to -2% in the second quarter,” wrote analysts at brokerage Bernstein.

“With this in mind, we expect the market will continue to wonder about the future ‘soft landing’ of Gucci, despite a very healthy margin improvement in the first half of 2019,” added Bernstein.

The hit to Kering’s shares also affected other luxury goods stocks, with LVMH falling 1.3% while Hermes declined by 1%.

Tristan d’Aboville, an analyst at equity research firm William O’Neil, said the outlook for the sector as a whole was becoming more difficult, given slower demand in China and the impact of a trade dispute between China and the United States.

“We turned negative on Luxury in the summer 2018, after several signals indicated a slowdown in demand from China. As a consequences, in September and October 2018, we removed Kering, Canada Goose and Moncler from our list of recommendations,” said d’Aboville. (Reporting by Sudip Kar-Gupta and Sarah White; Editing by Leigh Thomas)

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