By Mimosa Spencer and Tassilo Hummel

PARIS -The crisis at Kering's flagship Gucci label deepened in the first quarter, the company said on Wednesday as it reported sales below market expectations amid a worsening economic environment.

Kering's results, marked by a 14% annual sales decline with a 25% drop at Gucci, added to signs the luxury sector could be headed for another tough year as U.S. President Donald Trump's tariff announcements add to the recession fears weighing on shoppers' appetite for fashion.

A Visible Alpha consensus of analysts cited by HSBC had forecast a 9.7% drop in group sales and a 19% decline at Gucci, which accounts for roughly half of Kering's overall revenue and two-thirds of its profit.

"We are increasing our vigilance to weather the macroeconomic headwinds our industry faces," Chairman and CEO Francois-Henri Pinault said in a statement. "Kering faced a difficult start to the year."

Store traffic at the group, which also owns fashion houses Yves Saint Laurent, Bottega Veneta and Balenciaga, was weak in most regions, finance chief Armelle Poulou said.

Sales were down by 25% year-on-year in Asia and 13% in both Western Europe and North America.

Kering has closed 25 stores so far this year, Poulou told journalists on a call. Company executives said in February they planned to close around 50 of 1,800 stores, a third of which are outlets, to cut costs.

The group has been facing pressure from financial markets after a string of profit warnings as it tries to revive Gucci, which lost market share and almost a quarter of its revenue last year. Its shares have lost over 60% of their value since the first warning in March 2024.

GUCCI TROUBLES

Kering's sales report "disappoints low expectations", said Bernstein analysts, with the much-awaited rebound at Gucci "yet to appear".

Kering recently named in-house talent Demna as Gucci's new design chief, triggering another share selloff from investors who had hoped for a prominent external hire.

Demna has already started working with Gucci teams, Poulou said, while declining to say when the designer's first collection will be shown on the catwalk.

The change of designer, officially effective July, is likely to further delay the label's long-awaited rebound, analysts warned.

Predecessor Sabato De Sarno, dismissed after less than two years in the job, had been recruited for a reset at Gucci in 2023, including streamlining sales channels and targeting wealthier clients.

Asked if the recent closure of a high-end Gucci salon in Los Angeles, designed to serve ultra-wealthy clients on an appointment-only basis, indicated a shift in strategy, Poulou said the company was still working on moving the label upmarket.

(Reporting by Tassilo Hummel and Mimosa Spencer; Editing by Makini Brice, Kirsten Donovan)

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