Luxury group Kering’s fourth quarter sales were hit by a continued slump at its main brand Gucci, it said on Tuesday, but a slight improvement in the group’s performance in major markets China and the United States buoyed investors.
Shares in the French group jumped 5 per cent in early trade as finance chief Armelle Poulou told reporters the company’s sales in mainland China and among Chinese shoppers globally rose by a combined 6 percentage points compared with the third quarter, while US sales also increased.
Gucci continued to weigh, however, helping push Kering’s sales down 12 per cent in October-December on a comparable basis from a year earlier, but in line with expectations according to a Visible Alpha consensus cited by UBS. per cent
The French conglomerate sacked Gucci designer Sabato de Sarno last week as part of its efforts to revive the label, which accounts for nearly half of group sales and about two thirds of recurring operating profit. Gucci’s fourth quarter sales tumbled 24 per cent from a year earlier, below analyst expectations for a 19 per cent drop as the label’s aesthetic overhaul failed to win back shoppers.
Kering’s efforts to turn around Gucci with a new, minimalist design approach from Mr de Sarno, who took up the position two years ago, were complicated by a global slump in luxury demand.
The industry’s sales rate is the slowest in years, and consultancy Bain & Company estimated luxury sales fell 2 per cent globally last year, weighed down by a property crisis in China - a major market for Gucci.
Kering CEO Francois-Henri Pinault, in a statement, said the group has reached a “point of stabilization, from which we will gradually resume growth”.
Kering shares were up 4.8 per cent in early morning trading, as the results reassured investors of modest improvement after low expectations.
Analysts do not expect Gucci to rebound until next year and have said the recruitment of a new designer was likely to slow any progress given that stores are filled with De Sarno designs.
“We expect the market to focus on the new creative responsibility for Gucci,” said Bernstein analysts in a note, adding that last year was “an annus horribilis for Kering”.
Previously one of the industry’s biggest success stories, with soaring growth in the 2016-2020 period, fuelled by baroque, gender-fluid designs from Alessandro Michele, Gucci fell behind when shoppers' tastes shifted.
Rivals, including LVMH-owned Louis Vuitton and Dior, meanwhile, successfully tapped into the strong, post-pandemic surge in demand for fashion.
High-end Italian fashion house Bottega Veneta was the only larger Kering brand to report growth over the third quarter, with sales up by 12 per cent, although the decline in sales at other brands was less marked than in the previous three months.
Bottega Veneta’s star designer Matthieu Blazy, however, recently left the company to become Chanel’s next creative director.
Full year recurring income from group operations came to €2.6 billion, slightly higher than Kering guidance in October for €2.5 billion.
Kering’s 12-month price-to-earnings ratio, based on projected earnings, is 19, behind LVMH at 24 and Moncler at 25, as well as Burberry, which is currently undergoing a revamp under new management and has shot up to reach 60, LSEG data shows. - Reuters
