Gucci’s 14 percent comparable sales in the fourth quarter dragged down overall results at parent company Kering.
In a Nutshell: China’s Covid lockdowns were among the biggest factors in Gucci’s slowdown, though the luxury label is searching for its footing after creative director Alessandro Michele left in November. Successor Sabato De Sarno, previously a designer at Valentino, won’t show his new creative vision until Milan Fashion Week in September.
In a presentation to investors, chairman and CEO François-Henri Pinault said Gucci’s “disappointing” results “are not at the level of our expectations and potential.”
Revenue problems in China are common among luxury companies. Last week, Capri CEO John D. Idol reported a significant revenue decline in the region
And last month, Kering competitor LVMH Moët Hennessy Louis Vuitton’s chairman and CEO Bernard Arnault said he didn’t think Chinese tourists would resume any extensive travel overseas until after the start of the second half. The company posted a 15 percent revenue gain in the fourth quarter ended Dec. 31 to 22.7 billion euros ($24.3 billion), with losses in China due to COVID offset by growth in Europe, the U.S. and Japan. For the full year, revenues rose 23 percent to 79.2 billion euros ($84.7 billion) on a 17 percent net profit increase to 14.1 billion euros ($15.1 billion). Earlier in January, c-suite changes saw Pietro Beccari become chairman and CEO of Louis Vuitton. Beccari was succeeded as chairman and CEO of Dior by Delphine Arnault.
Compounding Kering’s fourth quarter troubles was Balenciaga‘s “difficult month of December” after controversy erupted over ad campaigns that put children in questionably suggestive situations.
“We made a clear error of judgment with no intention at all to shock, to provoke or to hurt anyone,” Pinault said, adding that he takes “full responsibility for this episode. And I present our apologies to anyone who was affected.” The company has created additional oversight to prevent it from happening again.
“Despite these setbacks, I am more than ever convinced that we are implementing the right strategy” to meet long term goals, he added.
Net Sales: For the year ended Dec. 31, 2022, total revenues rose 15 percent to 20.35 billion euros ($21.74 billion) from 17.65 billion euros ($18.85 billion).
By brand, Gucci revenues rose 8 percent to 10.49 billion euros ($11.20 billion), while Yves Saint Laurent was the year’s star performer as revenues rose 30.9 percent to 3.30 billion euros ($3.53 billion). Bottega Veneta posted a 15.8 percent gain to 1.74 billion euros ($1.86 billion), and Kering’s Other Houses saw revenues rise 17.9 percent to 3.87 billion euros ($4.14 billion). The balance of revenues came from the category listed as Kering Eyewear and Corporate.
By region, Japan represented 6 percent of total revenue, and posted 25 percent year-over-year comparable growth. North America and Western Europe each represented 27 percent of sales total sales, while year-over-year growth was 5 percent and 36 percent, respectively. Revenue in Asia Pacific was 33 percent of total sales, with year-over-year comparable growth at 8 percent. Rest of World represented 7 percent of total company revenues, and 15 percent year-over-year gains.
For the fourth quarter, Gucci revenue was down 14 percent on a comparable basis from the same 2021 quarter, with sales declining 15 percent in directly operated stores due to Covid, Kering said. Yves Saint Laurent’s quarterly revenues were up 4 percent on a comparable basis, while sales rose 7 percent at the company’s directly operated store network. Bottega posted a 6 percent revenue increase on a comparable basis, while sales at its directly operated stores rose 4 percent. Kering’s Other Houses, which also includes the Alexander McQueen and Brioni brands and its Jewelry Houses, was down 4 percent on a comparable basis, although sales at its directly operated stores rose 2 percent.
Earnings: Net income for the year was 3.6 billion euros ($3.85 billion).
CEO’s Take: Noting how the company nurtures the “desirability and exclusivity of our brands,” Pinault concluded: “In an environment that remains uncertain, I have no doubt that 2023 will be another year of success for our Houses and of growth for our Group.”