Finance

Gucci in focus as China lockdowns weigh on Kering Q1 sales

A person seems at a window show exterior a Gucci retailer, a part of the Kering group, at Tsim Sha Tsui buying district in Hong Kong January 17, 2013. REUTERS/Bobby Yip/File Photograph

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PARIS, April 21 (Reuters) – Disruptions from COVID-19 lockdowns in China solid a cloud on forecast-beating first-quarter gross sales from Gucci proprietor Kering on Thursday, even because the group pointed to sustained demand from the US and Western Europe for its high-end style and leather-based items labels.

Group gross sales for the three months ending in March got here to 4.96 billion euros ($5.4 billion), up 21% and barely above a consensus forecast of 4.69 billion euros cited by Citi analyst Thomas Chauvet.

Kering SA’s (PRTP.PA) star label Gucci, which accounts for over half of the French luxurious group’s annual gross sales, clocked 13.4% progress, with a powerful efficiency in the US, Western Europe and Japan, whereas COVID lockdowns disrupted enterprise in mainland China.

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This determine fell beneath Chauvet’s estimate for 23% progress and marked a deceleration from final quarter.

“The quarter is forward of expectations general by 5.6%,” stated Luca Solca, analyst with Bernstein, noting that Gucci was “one step behind” consensus forecasts whereas flagging an “spectacular efficiency” from smaller labels.

Yves Saint Laurent posted 37.2% progress, whereas gross sales at Bottega Veneta grew 16.3%. After just a few years of increasing Saint Laurent’s retailer community, the group is shifting investments to different areas like communication and advertising, in addition to increasing its product vary.

“The basics of the posh market in China stay intact,” Kering Chief Monetary Officer Jean-Marc Duplaix instructed journalists in a name, noting the resilience of Chinese language shoppers after disaster intervals, the rising center class and urge for food within the nation for luxurious manufacturers, echoing feedback from different luxurious teams together with LVMH (LVMH.PA) and Hermes (HRMS.PA), which each not too long ago reported a powerful begin to the yr.

The manager cautioned, nevertheless, that the lockdowns have been harder than the intermittent disruptions final summer time, and famous an influence on client sentiment within the nation.

Kering has been increasing Gucci’s product vary with an emphasis on the upper finish and executives flagged good traction at greater worth factors.

Retailer closures in China, in March and April, nevertheless, adversely affected cheaper price factors and slowed the label’s potential to attract in new, youthful purchasers, they stated in a name with analysts.

CFO Duplaix stated it was a bit early to touch upon expectations for earnings at Gucci, noting “a whole lot of shifting components,” citing the lockdowns in China, the place at the moment almost a 3rd of the group’s retailer community is in cities affected by restrictions, and the struggle in Ukraine.

He additionally stated it was too early to measure the influence of inflation on luxurious demand and prices, noting there was room for worth will increase at some labels together with Gucci, which raised some costs towards the tip of the quarter within the low and mid-single-digit percentages.

($1 = 0.9232 euro)

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Reporting by Mimosa Spencer; Modifying by Hugh Lawson, Mark Potter and Jonathan Oatis

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