Paris — Kering shares retreated sharply on Thursday after signs of slowing growth at the French luxury group’s Gucci brand, particularly in the US.

Analysts homed in on Gucci’s performance as one of the main reasons for the share price drop, after Kering’s first-quarter update released after Wednesday’s market close showed US growth cooling at Gucci, which accounts for some 60% of group sales.

The stock, which had hit a record on Tuesday ahead of the update, was down 3%t by 9.25am GMT, lagging rivals such as Louis Vuitton owner LVMH, and Italian luxury jacket maker Moncler, which also traded lower.

Gucci, with annual sales surpassing €8bn, has outperformed most of its peers in the past two years thanks to a flamboyant revamp under designer Alessandro Michele. That trend remained intact, with the brand posting first-quarter comparable sales growth of 20%, still higher than Vuitton and a touch above what some analysts had expected.

But investors have grown accustomed to Gucci beating forecasts by a wide margin, and its slowdown was partly due to a weaker performance in the US. Leather goods specialist Bottega Veneta also disappointed.

Gucci’s latest sales growth of 20% was less than 28% three months earlier, and down from nearly 50% at the start of 2018.

“There were two dark spots ... Gucci US decelerated to 5% organic sales growth and Bottega Veneta was back down at minus 9%, down more than in previous quarters,” JP Morgan said in a note.

On Tuesday, Maybelline mascara maker L’Oréal also pointed to a surprisingly weaker US backdrop.

US pressures

Asked about US pressures, Kering CFO Jean-Marc Duplaix said on Wednesday that the year-on-year comparison base there was very high, while the economic environment had softened a little. But there is no “specific concern so far”, Duplaix told analysts. Clients in North America tend to spend more on clothing and shoes than handbags, a category that is expected to grow faster this year, he added.

JP Morgan analysts noted a falling US stock market at the end of last year could have fed through to consumer spending in the first quarter.

Duplaix did not quantify any impact from an outcry over a sweater Gucci quickly pulled from sale and apologised for after some consumers said it was racist. The black roll-neck featured large red lips cut out around the mouth area.

Kering is still seen as one of the luxury industry’s best performers, thanks to Gucci’s strength in thriving markets such as China and despite an overhaul at Bottega Veneta.

“Management said that growth for Gucci in March was in line with January and February combined, which we see as reassuring,” RBC Capital Markets said. “Saint Laurent, Balenciaga and Alexander McQueen continue to shine, while Bottega Veneta’s difficulties in a transition year are not enough to offset the positives.”