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By Bloomberg

Kering SA tumbled in Paris trading after reporting Gucci’s weakest quarterly performance in more than five years and decelerating sales growth at handbag maker Bottega Veneta amid a slowdown in Asia.

The shares traded 6 percent lower at 167.35 euros as of 11:50 a.m. in the French capital, having made their steepest intraday drop in almost two years.

Gucci’s sales declined 7.9 percent in the first quarter on a comparable basis, Kering said Tuesday after markets closed, missing the median estimate for a 4 percent drop. That was the weakest performance since the third quarter of 2009 and the seventh consecutive quarter of flat to negative trends, according to Citigroup. Bottega registered 3.1 percent growth on the same basis, about 2 percentage points below estimates.

Gucci’s performance is “a tough headline to swallow,” said John Guy, an analyst at MainFirst Bank AG in London. “Bottega felt the chill.”

Kering flagged in February that 2015 would be a year of transition for Gucci as it overhauls management and drops some wholesale clients among other steps to restore growth at the unit. Though Gucci accelerated efforts to tighten distribution in Europe in the quarter, business in North America was softer than anticipated and comparable sales in the company’s directly operated stores in the Asia-Pacific region fell 10 percent.

Bumpy Path

“Gucci is performing below its long-term potential but the recovery path for such a mega-brand against an adverse environment in China should be bumpy,” said Rogerio Fujimori, an analyst at RBC Capital Markets in London. “Doing the right things for the brand may require, in our view, reinvesting even more behind areas like digital” to restore its position in fashion.

Bottega was penalized by high price gaps between Europe and Asia, where products cost more and the brand is overexposed, and strong growth in the year earlier period in Japan, according to Raymond James analyst Hermine de Bentzmann. She lowered her recommendation on Kering’s stock to underperform.

Kering’s total revenue rose 11 percent to 2.65 billion euros ($2.9 billion), matching estimates, helped by a weaker euro and a stronger-than-anticipated performance by sportswear maker Puma.

“Our priority today is to give our flagship luxury brand fresh impetus and we are confident in the success of the action plans initiated by the new teams,” Chief Executive Officer Francois-Henri Pinault said in Tuesday’s statement. “We expect a gradual improvement in our performances throughout the year.”

Pricing

Kering also signaled it will rebalance some prices as a weakening euro widens the differential between regions. While Kering may harmonize how much it charges for some products globally, any changes will be on a case-by-case basis, Chief Financial Officer Jean-Marc Duplaix said on Tuesday. Some adjustments have already been made at Bottega, Group Managing Director Jean-Francois Palus added.

In doing so, Kering joins companies including Chanel responding to a growing pricing differential between regions caused by the weakness of the euro. While companies including Gianni Versace SpA and Burberry Group Plc have signaled they may follow suit, LVMH Moet Hennessy Louis Vuitton SE said this month it would delay any decision until currency rates stabilize.