Sales slow at Kering

Sales growth at Gucci-owner Kering slowed slightly in the third quarter, in line with expectations, as the luxury group offset some of the hit from turmoil in Hong Kong with strong spending by shoppers in other Asian markets.      

Gucci managed to capture sales to Chinese clients shifting back to the mainland, where it has a large store network, as well as in other shopping hubs like South Korea, Kering executives said on Thursday.

As a result, Gucci’s sales were up 10.7% on a comparable basis in the July to September period, beating expectations.

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Not all Kering brands, which include Saint Laurent, managed to absorb the Hong Kong hit to the same degree, meanwhile, which could still bode ill for other luxury firms with less of a presence on the Chinese mainland than the likes of Gucci.

“The slide in Hong Kong varies from one brand to another,” Kering’s financial chief, Jean-Marc Duplaix, said.

Kering as a whole reported a 14.2% revenue increase in the third quarter to 3.88 billion euros ($4.30 billion).

That marked a 11.6% increase on a comparable basis, roughly in line with analyst forecasts for a slowdown from the 13.2% growth notched up a quarter earlier. 

The group’s Bottega Veneta handbag label, while much smaller than Gucci, also posted an encouraging performance after Kering parachuted in a new designer, with sales jumping.

GUCCI IN THE SPOTLIGHT

Gucci’s performance is under particular scrutiny after several years of booming earnings under designer Alessandro Michele.

The Italian fashion label drives the bulk of profit at Paris-based Kering, and investors are keeping a close watch on its momentum as the pace of growth slows.

Despite weak spots including in the United States, where it is struggling to reverse a contraction, analysts said Gucci’s third quarter performance was reassuring, in that it showed sales trends stabilizing rather than a sharp correction.

Revenues had risen 12.7% a quarter earlier.

“A sales beat ... and a modest deceleration relative to the second quarter of 2019 are probably enough to support investor sentiment,” Citi analysts said in a note.