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Kering Sees Strong Quarter Despite Tepid Growth at Gucci

Sales continued to grow in the third quarter for Kering, but were negatively impacted in Asia as Covid cases spiked, weighing on revenue at the company’s powerhouse Gucci brand.

In a Nutshell: The luxury goods company said business levels remained high driven by strong momentum in North America. Sales in Western Europe and Japan continued to improve, despite markets that were still impacted by a lack of tourists. Following solid growth in the first half, sales continued to show signs of growth in the Asia-Pacific region relative to 2020 and 2019, but were held back by rising Covid-19 cases during the summer.

“On the back of an excellent first half, Kering achieved a very solid third quarter at group level, up double digits over 2019. Saint Laurent, Bottega Veneta and our Other Houses, as well as Kering Eyewear, all posted outstanding performances. With the launch of its Aria collection, Gucci is set for an intense fourth quarter,” François-Henri Pinault, Kering’s chairman and CEO, said.

However, the impact from Covid hurt sales at Kering’s Gucci brand, which saw a tepid 4.5 percent gain in revenue for the quarter to 2.18 billion euros ($2.54 billion) from 2.09 billion euros ($2.43 billion) last year. Kering said sales from directly operated stores at the label grew 6.9 percent. On a comparable basis, wholesale revenue fell 19.1 percent in the quarter, reflecting the fashion house’s strategy to make its distribution more exclusive. The Aria collection began to arrive in stores in late September.

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The standout in the third quarter was Kering’s Yves Saint Laurent brand, which posted a 27.8 percent jump in revenue to 652.9 million euros ($759.6 million) from 510.7 million euros ($594.1 million).

Wholesale revenue rose 22.1 percent on a comparable basis from last year. Sales at company-owned stores rose 30.9 percent from 2020 figures, “due to the success across product categories, all posting double-digit growth,” Kering said. “This outstanding momentum continued in all geographic regions, notably North America and Europe. The house continues to reinforce its appeal in Asia-Pacific,” the company said.

At Bottega Veneta, sales rose 9.3 percent to 363.4 million euros ($422.8 million) from 332.5 million euros ($386.8 million). Company-owned stores saw a 6.1 percent gain in sales year-on-year, while comparable wholesale sales rose 18.3 percent in the quarter. “The house’s very balanced growth is driven by its success with both existing and new customers,” Kering said.

For Kering’s other fashion brands, revenue in the quarter was up 26.1 percent to 843.7 million euros ($981.5 million) from 669.1 million euros ($778.4 million). Revenue increased “very sharply relative to 2019, due notably to the ongoing expansion at Balenciaga and Alexander McQueen,” Kering said.

Revenue from other segments rose 24.1 percent, mostly due to strong performance from Kering Eyewear.

Net Sales: Group revenue for the third quarter rose 12.2 percent to 4.04 billion euros ($4.70 billion) from 3.60 billion euros ($4.19 billion). Revenue from the luxury houses’ directly operated stores, including e-commerce, grew by 12 percent on a comparable basis relative to the third quarter of 2020 and by 11 percent versus the same 2019 period.

The company said online sales grew at a firm pace, up 24.3 percent from last year and 147.9 percent from the same 2019 period.

The company said for the first nine months of the year, group sales were up 36.6 percent on a comparable basis year-on-year, and up 9 percent versus the same 2019 period.

Earnings: The company didn’t provide third-quarter earnings results.

Kering did note that during the third quarter the company made a decision to go fur free starting with Fall 2022 collections. And on Sept. 30, Kering Eyewear completed the acquisition of Danis Luxury Eyewear brand Lindberg.

CEO’s Take: “In a constantly evolving luxury market, we are strengthening the positioning and distribution of all our brands, providing them with the resources they need to be ever closer to their customers. Sustainability is central to our strategy, and we achieved major new milestones in recent weeks. More than ever, we are investing to sustain our profitable growth trajectory over the long term and poised to successfully pursue our journey,” Pinault said.