Gucci hits rough patch on Asia weakness
Blow for Kering as revenues at Italian fashion house fall short of expectations
Sales at Gucci slowed unexpectedly in the third quarter because of a resurgence of Covid-19 in Asia and the timing of a new collection, a setback for owner Kering as the French luxury group seeks to revitalise the Italian fashion house.
Gucci’s quarterly revenues rose 3.8 per cent on a comparable basis from a year earlier to €2.2bn, well short of analysts’ expectations for a 9.3 per cent increase, according to Bloomberg data. Overall group like-for-like sales were €4.2bn, ahead of analysts’ expectations for €4.1bn and up 12 per cent compared with a year earlier.
Jean-Marc Duplaix, Kering’s chief financial officer, said he expected a stronger performance at Gucci through the end of the year because designer Alessandro Michele’s new Aria collection only hit shelves in late September.
“If we look at overall drivers, Gucci is on the right track. There was clearly wait-and-see behaviour before the new collection, especially in China . . . [but] we expect a very intense end of the year,” he said, referring to marketing and launch events at stores.
Investors have been scrutinising the performance of Gucci, which accounts for more than half of group sales and the majority of profits, as its growth has slowed recently after years of very strong gains. Although Kering’s smaller brands Yves Saint Laurent and Bottega Veneta have been expanding strongly, some investors have questioned whether the group remains too reliant on Gucci, prompting some to call for it to diversify through acquisitions.
“The Gucci party has been postponed,” wrote Bernstein analyst Luca Solca in a note. The label “continues to be behind mega-brand peers, despite easier comparisons”, he added, referring to LVMH fashion and leather goods division’s 24 per cent year-on year comparable sales increase the quarter.
Kering’s larger rival LVMH last week reported forecast-beating sales for the third quarter driven by its all-important Louis Vuitton brand, and continued strong demand in the US and China.
Both groups are on track to exceed their pre-pandemic revenues this year as the biggest luxury brands recover faster than some smaller independent rivals. But Kering shares trade at a roughly 20 per cent discount to LVMH on a forward price-to-earnings basis, reflecting its slower growth rates.
Kering’s shares have lagged behind those of competitors this year rising nearly 10 per cent before the quarterly sales figures were released, compared with an increase of 26 per cent for LVMH shares, 35 per cent for Richemont and 45 per cent for Hermès.
After a strong start to the year, luxury stocks have sold off since mid-August as investors have worried that new curbs on conspicuous consumption in China could cast a pall over demand as during another anti-corruption campaign a decade ago.
Hermès is due to report quarterly sales on Thursday.