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Kering, the parent company of fashion brand Gucci, continues to take hits on the stock market after its dismal forecast on Tuesday night. Analysts are weighing what Gucci's poor numbers in China mean for the entire luxury market.

In the news: CEO François-Henri Pinault, also known as husband of actress Salma Hayek, sent a dismal Kering financial forecast into the world on Tuesday.

  • Gucci sales are expected to plummet nearly 20 percent in the current first quarter compared to a year ago.
  • The root cause is a deep dip in the Asia Pacific region. Analysts say this indicates that Gucci's fashion items are selling worse than anticipated in China.

The stock market reaction: Kering lost 13 percent on the stock market Wednesday and will continue to fall on Thursday. Other luxury shares were also dragged down, but major rival LVMH of that other French luxury tycoon, Bernard Arnault, is back on the stock market charts with green figures on Thursday.

Out of favor

The big question: Is this a Gucci problem, or is all luxury brands in China out of favor?

  • That the malaise at Kering infected LVMH shares only temporarily suggests the former. According to the brokerage house Jefferies, Gucci no longer has the same resonance with Chinese consumers as before.
  • There is a glimmer of hope, though. Since last year, Sabato de Sarno has been the new creative director at Gucci, replacing Alessandro Michele. De Sarno's first collection, which has a calmer style than his predecessor, has been well received, according to Kering.
  • Still, some analysts see a macro trend in the Gucci figures. At Citi, they value Kering's warning as "a rather worrying signal for the luxury goods sector."
  • London analysts point out that earlier British luxury house Burberry also had to revise downward its forecasts for the Chinese market.
  • All this may indicate that China's upper middle class is experiencing a recession of sorts, forcing them to cut corners and postpone "aspirational" purchases - such as a Gucci bag. China's economy has been hit by a real estate crisis for some time.

To look forward to: Upcoming quarterly figures from European luxury companies are going to shed more light on how common the waning popularity of expensive European items is in China. But what we do already know for certain: the time is over when every European luxury brand is automatically on the rise there.

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