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Even ‘Hottest Brand’ Gucci Can’t Shake Off Lockdown Malaise

Kering’s fourth quarter report saw Gucci post a revenue decline, while Covid-19 lockdowns weighed on first-half results.

In a Nutshell: For the fourth quarter ended Dec. 31, total revenue fell 8.2 percent to 4.00 billion euros ($4.81 billion) from 4.36 billion euros ($5.25 billion), and were down 5 percent on a comparable basis. Some of the decline was attributed to lockdowns across parts of Europe, which dampened luxury travel.

Fourth quarter sales at Gucci, Kering’s powerhouse brand that contributes about 60 percent of overall revenue, sagged 13.5 percent to 2.28 billion euros ($2.74 billion), or 10.3 percent on a comparable basis, including a 7.5 percent dip for the retail network. Last month, The Lyst Index of hottest brands for Q4 named Gucci as the leader of the pack, indicating that any negative effects stemmed from Covid lockdowns.

Yves Saint Laurent posted a 3 percent decline to 552.6 million ($664.9 million), but was up 0.5 percent on a comparable basis. Bottega Veneta posted a 12.1 percent gain in fourth quarter revenue to 374.7 million euros ($418.4 million). Kering said trends at Bottega Venetta were “positive in all distribution channels in the fourth quarter, with revenue up 15.7 percent on high bases of comparison.”

The company’s couture and leather goods division—which includes Balenciaga and Alexander McQueen, and its jewelry houses Qeelin and Boucheron, among other brands—saw revenue in the quarter slip 1 percent to 693.1 million euros ($834.0 million), but up 1.7 percent on a comparable basis. The company also groups its other smaller business segments, such as eyewear, into the category classified as corporate and other, and said revenues fell 14.1 percent in the quarter to 103.2 million euros ($124.2 million), and down 11.0 percent on a comparable basis.

“In a year of disruption, Kering demonstrated remarkable resilience and agility. We achieved a solid top-line recovery in the second half, we protected our margins while continuing to invest in our Houses and growth platforms, our cash flow generation remained elevated, and we further strengthened the Group’s financial structure,” François-Henri Pinault, chairman and CEO, said.

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Net Sales: Revenue for the year fell 17.5 percent to 13.10 billion euros ($15.8 billion) from 15.88 billion euros ($19.11 billion). Like-for-like sales were down 16.4 percent, Kering said. Retail comparable sales were down 15.9 percent due to store closures and the halt in tourism, with a sharp rebound in the second half led by North America and Asia-Pacific. In addition, online sales jumped 67.5 percent year-over-year, with online sales accounting for 13 percent of total sales from the retail network.

Earnings: Net income for the year fell 6.9 percent to 2.15 billion euros ($2.59 billion) from 2.31 billion euros ($2.78 billion). On an adjusted basis, excluding non-recurring items, net profits for the year fell 38.6 percent to 1.97 billion euros ($2.37 billion) from 3.21 billion euros ($3.86 billion).

Kering did not provide guidance for 2021. “Thanks to its strong business model and structure, along with its robust financial position, Kering remains confident in its growth potential for the medium and long term,” it said.

CEO’s Take: “More than ever, I am convinced that our strategy and business model are perfectly in sync with the current and future trends of the Luxury universe. We are emerging from the crisis stronger and better positioned to leverage the rebound. We invest in all our brands to maximize their potential, and to resume our profitable growth journey,” Pinault said.