Gucci is bracing for a major 20% sales drop in the first quarter of 2024, primarily attributed to a slowdown in Asia, as stated by its parent company Kering.

Interestingly, Gucci's downturn contrasts sharply with the resilience of competitors such as LVMH and Hermès. Sales from the mentioned luxury brands have remained strong despite market challenges.

READ NEXT: Gucci Owner Kering Sees 14% Slump in Stock Price After Profit Warning Owing to Asia Sales Decline

Why Gucci Predicts 20% Sales Drop

For context, Gucci derives over a third of its sales from China. A recent update from VCPost states that the country is likely going through economic struggles, with foreign investors raising their alert status.

This case is not isolated to Guccie's first quarter in 2024. 

In another VCPost report, Kering already warned that its profit would decline, particularly in the Asia-Pacific region.

In 2024, Gucci contributed two-thirds of the group's operating income. Kering, which also owns brands like Yves Saint Laurent and Balenciaga, reported a 17% decrease in net profit last year, with its shares experiencing a decline of over 23% in the past year.

In contrast, LVMH reported higher-than-expected sales for 2023, while Hermès celebrated record annual sales, signaling resilience in the luxury market.

Per BBC News, it's puzzling how Gucci will face a sales drop that high since it's known for targeting younger, aspirational shoppers. The increased vulnerability to economic pressures is said to be the cause. 

In response to their earnings decline, Kering revamped Gucci's top management, appointing new executives and launching the Ancora collection, which received positive feedback upon its release in mid-February.

The luxury fashion house is set to announce its financial results on Apr. 23, reflecting the 20% sales drop and the extent of the sales downturn.

READ MORE: How to Save Money on Designer Brands