This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now.

In a troubling development for the luxury fashion industry, Gucci has reported a staggering 25% drop in sales during the first quarter of the year, amounting to approximately 1.6 billion (around $1.8 billion). This significant decline not only highlights the ongoing struggles faced by Gucci, but it has also impacted the overall performance of its parent company, Kering, which saw its revenues dip by 14% to 3.9 billion.

The downturn for Gucci and Kering is part of a broader trend that has been unfolding since last year, as luxury spending continues to wane in key markets worldwide. CEO Franois-Henri Pinault acknowledged the challenging start to the year in a press release issued on Wednesday, stating, As we had anticipated, Kering faced a difficult start to the year. We are increasing our vigilance to weather the macroeconomic headwinds our industry faces, and I am convinced that we will come out stronger from the present situation.

In addition to Guccis struggles, Kering's other brands also experienced mixed results. Yves Saint Laurent sales fell by 9% in the first quarter, while Bottega Veneta and Other Houses managed to record growth, with increases of 4% and 11% respectively. This underlines a complex landscape within Kering's portfolio, where some brands are thriving while others falter.

In the stock market, Kering's shares took a hit, falling by 3.5% in Paris on Thursday. This drop has contributed to an alarming total decline of over 28% for the year and an even steeper 48% decline over the past 12 months. Investors are increasingly wary amid fears of recession and the lingering effects of tariffs imposed during President Donald Trump's administration, which have significantly dampened luxury spending in vital markets such as Asia and North America.

Specifically, Kering reported a sharp 25% decline in the Asia-Pacific region, mirroring the adverse trends seen in the final quarter of 2024. Meanwhile, both Western Europe and North America experienced sales decreases of 13%, and Japan saw an 11% drop in luxury consumption.

In contrast, Kering's primary competitor, LVMH, which operates prestigious brands like Givenchy and Fendi, also reported a decline, with first-quarter sales falling by 3%. This was a stark contrast to the 2% rise that analysts had predicted, indicating a challenging business environment across the luxury sector.

In an effort to rejuvenate Gucci, the brand recently appointed Demna Gvasalia, a notable figure previously with Balenciaga, as its new artistic director. This strategic move aims to revitalize the brand following a shift in consumer preferences that have seen younger luxury buyers lean toward a more understated and minimalist aesthetic, favoring brands such as Miu Miu and Loewe over Gucci's traditionally eclectic and maximalist style.

Analysts at Deutsche Bank have expressed skepticism about the investment potential in Kering, suggesting that the uncertainty surrounding the change in creative leadership has led to a cautious "wait and see" approach. The overall sequential slowdown reported in all regions, with the exception of Asia, appears to be slightly more severe than that of its competitors.