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Kering Revenues Rise 2% in Q1 as Gucci Logs Modest Gain

 Kering said sales inched up by 2 percent in the first quarter, as it star brand Gucci logged a modest gain amid a decline in revenues in North America and a gradual recovery in China.

The French luxury conglomerate reported on Tuesday that revenues in the three months to March 31 totaled 5.08 billion euros, representing an increase of 1 percent in comparable terms. This was sharply below the growth rates reported by sector peers LVMH Moët Hennessy Louis Vuitton and Hermès International.

Kering’s performance in the first quarter remained mixed, as we had anticipated,” Kering chairman and chief executive officer François-Henri Pinault said in a statement.

“As we work to augment the desirability of our brands and raise their profile in key markets, we are encouraged by the gradual improvement in activity month after month during the period. A host of initiatives undertaken by all our houses to enhance their appeal and exclusivity lays the foundations for sustained, profitable growth,” he added.

The modest sales increase came on the heels of a 2 percent decline in the fourth quarter. The figures were marginally above a consensus of analyst estimates, which had called for a 1 percent rise in overall comparable sales to 5.04 billion euros. 

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The group reported “good momentum” in Western Europe and Japan. It said revenue was down in North America but resumed growth in Asia-Pacific due to the progressive reopening of the Chinese market.

Organic sales at Gucci were up 1 percent in the first quarter, compared with a 14 percent drop in the prior three months, and a rise of 13.4 percent during the same period last year.

Like-for-like sales at Gucci had been forecast to remain flat. 

The Italian brand is in a transition period, having parted ways with its longtime creative director Alessandro Michele last November. His successor Sabato De Sarno, previously a designer at Valentino, is to unveil his first effort in September during Milan Fashion Week.

Prior to the release of the figures, Luca Solca, analyst at Bernstein, said he was confident that the French luxury group could revive Gucci’s fortunes, following its textbook relaunch of the brand in 2015.

“Its track record in brand revivals prompts us to believe that Kering’s top management stands a high probability of successfully turning Gucci’s fate around,” he said in a report in February.

“Scale is the name of the game in luxury business, and Gucci is a member of the exclusive mega-brand club,” Solca added. “Once Gucci has a new vision, it will have all it needs to attract attention and lure consumers back to its stores.”

Meanwhile, the group’s other brands posted mixed results.

Comparable sales at Bottega Veneta were flat in the first quarter, compared with a 6 percent rise in the previous three months. Organic sales at Saint Laurent were up 8 percent, versus a 4 percent rise in the prior quarter.

Like-for-like sales at other houses were down 9 percent, following a 4 percent drop in the fourth quarter, when sales were hit by the advertising scandal at Balenciaga.

“Trends at Balenciaga and Alexander McQueen were positive. Brioni’s sales were excellent, and the performance of Kering’s jewelry houses was outstanding,” Kering reported. However, the division’s wholesale revenues were down 32 percent due to the situation in the U.S. and ongoing efforts by brands to streamline their wholesale accounts.

Organic revenues in the Kering eyewear and corporate segment were up 11 percent.

Kering is the last of France’s three biggest luxury groups to report first-quarter results.

Earlier this month, LVMH said revenues rose 17 percent in the three months to March 31 to 21.04 billion euros, an increase of 17 percent at constant exchange rates. Its fashion and leather goods businesses posted an 18 percent rise in organic revenues.

Hermès reported sales gained 22 percent during the quarter, despite upping the price tags an average of 7 percent — as high as 10 percent in some regions. Revenues rose 23 percent on a like-for-like basis.