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Gucci slows down but still helps Kering beat estimates

Robert Williams

Bloomberg

 /  Fri, October 25, 2019  /  02:03 pm
Gucci slows down but still helps Kering beat estimates

A Gucci sign is seen outside a shop in Paris, France, December 18, 2017. (REUTERS/File Photo/Charles Platiau)

The Gucci fashion house reported sales that slowed but still beat estimates, cushioning owner Kering’s landing after several years of soaring growth.

The Italian brand’s expansion was led by the Asia-Pacific region, making it the latest luxury label to show that Chinese consumers are still splashing out amid a deepening trade war with the US and protests in the Hong Kong shopping hub.

Gucci’s missed sales in Hong Kong were “in large part made up for” by other markets, Chief Financial Officer Jean-Marc Duplaix said on a call.

The brand’s sales rose 11 percent on a comparable basis in the third quarter. While that’s about 2 percentage points above analysts’ estimate, it’s down sharply from the 30 percent or more at which the label had been expanding over the past two years.

Earlier on Thursday, rival Hermes reported 15 percent quarterly growth excluding currency shifts. LVMH’s fashion and leather business previously posted a 19 percent gain for the latest period.

Despite the strength in China, Kering also faces questions over its U.S. business, which unexpectedly shrank during the second quarter. There was no improvement there in the latest three months, Duplaix said, and a turnaround will take time to bear fruit.

“Tourism is down,” he said, and “consumer sentiment is deteriorating.”

Read also: Gucci faces possible backlash for straitjackets at Milan show

Other brands

The Paris-based company is still looking for another brand to take up the slack as Gucci slows from its breakneck pace. Saint Laurent’s growth fell short of expectations in the latest quarter.

The smaller Bottega Veneta label, which had stagnated, is improving faster than expected after Kering ramped up investments in it. The company plastered trams and subway stations with ads to promote the brand’s revamped look from a young designer, Daniel Lee, hired last year from the ranks of LVMH’s Celine.

Kering reported sales after markets closed. The shares are up about 15 percent this year.

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