Gucci sales jump in Europe and Japan offsets weakness in China
today Oct 22, 2015
Kering's luxury brand Gucci posted a 0.4 percent drop in like-for-like third-quarter sales as spending by Chinese tourists in Western Europe and Japan only partially offset declines elsewhere in Asia.
The expected decline came after a surprise 4.6 percent sales rise in the second quarter, which was helped by one-off markdowns of previous collections, particularly in China.
Investors expect Gucci's revamp under new Chief Executive Marco Bizzarri and creative head Alessandro Michele, appointed at the beginning of 2015, only to start yielding results towards the end of the year, and in earnest in 2016.
Group Managing Director Jean-Francois Palus said demand from Chinese customers for Gucci slowed in the third quarter as the rise in sales in Europe and Japan did not fully compensate lower revenue from mainland China, Hong Kong and South Korea.
"And we do not see any improvement," Palus said.
Gucci third-quarter sales on a comparable basis jumped 27 and 24 percent respectively in Western Europe and Japan.
"This quarter was a period of transition," Kering Finance Director Jean-Marc Duplaix said. "We are only starting now to reap results from the brand's reorganisation," he said, adding that new designs started hitting the shelves last month.
Duplaix said it was not clear whether the stock market slump in China had hit demand for luxury goods at home, or abroad.
"For me the correlation is not evident," he told reporters after Kering published third-quarter revenue figures.
Earlier this month, arch-rival LVMH said the stock market collapse in China had affected sales, particularly at its Louis Vuitton brand.
The Chinese luxury goods market has been hit by a government crackdown on corruption.
"Kering breaks a series of disappointing updates by luxury goods companies started last week and reports slightly better than expected third-quarter organic sales progression, against relatively muted expectations," said Exane BNP Paribas analyst Luca Solca.
Burberry and Hugo Boss also both blamed poor demand in China for disappointing trading updates last week.
Kering's total comparable sales were up 3.1 percent in the third quarter, with strong growth from French fashion brand Saint Laurent.
The company said the relaunch of its Puma sports label remained on track with like-for-like revenues up 3.9 percent during the period.
Kering said watch brands, which include the newly acquired Ulysse Nardin, "continued to be held back by an unfavourable market context" but jewellery makers Boucheron, Pomellato and Qeelin recorded revenue growth of 11 percent.
The company said trading at Italian tailor Brioni, acquired four years ago, remained "volatile".
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