Luxury group Kering suffered a sales slowdown during key Christmas shopping season as Covid-19 closed stores across Europe, hurting demand for fashion and accessories from its largest Gucci brand.
Quarterly sales for the group controlled by French billionaire François-Henri Pinault fell 4.8% like-for-like to € 4 billion, while Gucci sales contracted 10.3% to 2 , 3 billion euros. Analysts expected a 1% increase for the group in the last three months of the year and a 4% drop for Gucci.
Kering stock opened 7 percent less in morning trading in Paris.
The luxury industry has been hit hard by the freeze on international travel, which has driven the big spenders of Chinese tourists away from the fashion capitals of Paris and Milan. But some of the pain has been offset by wealthy customers indulging in luxury goods, while many other types of spending remain off limits during the pandemic.
To cope with the crisis, Kering and its French rivals LVMH and Hermès have sought to better cater to local customers, while cutting costs, hosting digital fashion shows and significantly expanding online sales.
Kering, whose brand portfolio also includes Saint Laurent and Balenciaga, saw a strong boost in e-commerce last year, which more than tripled from 2019 and now accounts for 13% of sales.
Kering’s shares have fallen behind as investors worry whether Gucci is losing momentum after years of stellar growth driven largely by Chinese and younger buyers, who flocked to the colorful styles of vintage inspiration from creative director Alessandro Michele. They fell around 2% last year, compared to 29% for LVMH, which is home to star brands Louis Vuitton and Dior, and a 32% jump for Hermès.
Gucci, which generates the bulk of Kering’s revenue and profits, suffered more during the Covid-19 crisis than some rivals including the biggest brands of LVMH, which appreciated a return to growth at the end of last year.
Gucci’s sales have been “disappointing compared to a number of soft luxury peers, such as Vuitton, Dior, Hermès and own brands of Kering, Bottega Veneta or Balenciaga, and should continue to fuel concerns about the the brand’s ability to win once again, ”said Thomas Chauvet, analyst at Citi. “On a positive note, Gucci’s profitability has been a bit better than expected.”
Kering has not provided financial targets for this year, but has indicated that it will propose a stable dividend of € 8 per share. Annual revenue fell 16.4 percent like-for-like to 15.9 billion euros, while recurring net profit fell 39 percent to 1.97 billion euros.
“We are emerging from the crisis stronger and better positioned to take advantage of the rebound,” Chairman and CEO Pinault said in a statement. “We are investing in all of our brands to maximize their potential and resume our path of profitable growth.”