Apr 21, 2016
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Kering's Gucci sales growth slows in first quarter, below expectations

Apr 21, 2016

French luxury group Kering's flagship Gucci brand posted a lower-than-expected rise in first-quarter sales on Thursday amid a difficult environment for the luxury sector.

Gucci posted 3.1 percent growth in comparable sales, below analysts' expectations of 5 to 6 percent and slowing from 4.8 percent growth in the last quarter of 2015.

Gucci - Fall-Winter2016 - Womenswear - Milan - © PixelFormula

The luxury goods industry has had a difficult start to the year, partly due to the Chinese economic slowdown and a sharp drop in tourist traffic in shopping hotspots such as Paris, Milan, Hong Kong and Macau.

The Gucci first-quarter results are "confirming it is starting to get traction - but pointing to the fact that this will progress over time and that Rome wasn't built in a day," Exane BNP Paribas analyst Luca Solca said in a note.

Kering's second luxury brand, Bottega Veneta, posted an 8.3 percent drop in comparable sales, suffering from its strong exposure to Asian clients.

Yves Saint Laurent carried on a strong track with 26.5 percent growth in comparable sales, but Balenciaga and Boucheron suffered from their exposure to the French market's woes following the November attacks in Paris.

Sales at sportswear brand Puma grew by 8.1 percent on a comparable sales basis.

The Kering group overall posted 2.724 billion euros in first-quarter sales, below expectations in a Reuters poll that predicted 2.767 billion euros.

"Kering's solid first-quarter 2016 performance in a challenging market environment is testimony to our focus on driving organic growth," François-Henri Pinault, Kering's Chairman and Chief Executive Officer said in a statement.

"We are confident that we can extend our growth trajectory over the full year thanks to our multi-brand model, our continued strict operating and financial discipline, and the top-quality work of all our teams."

Kering is among the last of luxury groups to report first-quarter sales. Rivals Prada, LVMH, Richemont and Burberry have all said they were suffering from weaker demand since the start of the year.

Analysts say that adding to their woes, their troubles also stem from consumers, particularly in the United States and Asia, increasingly suffering from mega-brand fatigue, preferring instead smaller, more up-and-coming and innovative brands.


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