By Nadya Masidlover
PARIS--French luxury and lifestyle company Kering SA said on
Tuesday its priority is to give "fresh impetus" to its flagship
brand Gucci, as business at the label took a deep dive in the first
quarter.
Kering--home to high-end labels such as Bottega Veneta and Yves
Saint Laurent as well as sports brand Puma--posted a 11% rise in
total quarterly sales to 2.65 billion euros ($2.83 billion) from
EUR2.38 billion a year earlier, as the weak euro bolstered
sales.
But stripped of the positive currency impact and excluding
acquisitions and disposals, sales fell 0.6% over the period, as the
company's luxury division faltered with revenue plunging at star
brand Gucci.
The figures "reflect a complex economic and monetary environment
as well as the transition under way at Gucci," Kering Chairman and
Chief Executive François-Henri Pinault said.
"Our priority today is to give our flagship luxury brand fresh
impetus," he added.
In the first quarter, sales at Gucci--which makes up around a
third of Kering's revenue--fell 7.9% on a like-for-like basis to
EUR869 million, amid fallout from the overhaul at the brand. The
company's sales numbers are presented in a like-for-like basis,
which excludes acquisitions and disposals and currency effects.
Late last year, Kering stepped in to reinvigorate Gucci as sales
at the brand slumped. Both the head designer and chief executive
were replaced. Since then, the label has moved to radically reduce
the wholesale side of its business as it seeks to upgrade the
brand's image aiming for the vast majority of its sales to be made
within Gucci's own store network. The move weighed on Gucci's
first-quarter sales, said Chief Financial Officer Jean-Marc
Duplaix, with wholesale revenue down 23% over the period.
Even Kering's Bottega Veneta label, which had seemed largely
immune to the recent slowdown in the luxury industry, has begun to
record more modest growth in recent times.
In the first quarter, Bottega Veneta posted a 3.1% rise in
sales, hit by a difficult business environment in Hong Kong and
Macau, where the label makes around 19% of its sales, said Mr.
Duplaix.
The figures echo a wider industry trend as luxury megabrands
face more challenging times after a long stretch of booming
business stalled in 2013. For high-end goods purveyors, last year
marked a turning point as big brands struggled to revive demand,
amid changing consumer tastes, difficult macroeconomic conditions
in Europe and a slowdown in China.
The world's largest luxury group LVMH Moët Hennessy Louis
Vuitton SA has also sought to renew the image of its main namesake
brand Louis Vuitton over the past two year. The label brought in a
new designer and rolled out fresh lines of pricey yet discretely
branded leather handbags, steering focus away from its cheaper
signature monogrammed canvas bags. While LVMH said business is
improving at the brand, sales in the first quarter of 2015 at
LVMH's fashion and leather goods division remained subdued, rising
1% on a like-for-like basis to EUR3 billion.
At Gucci, the first effects of the change in the label's
management and creative team are expected "in the second half of
the year," said Mr. Duplaix.
The company's other luxury brands--which include fashion houses
such as Balenciaga, Stella McCartney and jeweler Boucheron--also
reported a drop in sales, down 4.5%.
The one bright spot in Kering's luxury portfolio came from its
Yves Saint Laurent brand where quarterly sales were up 21%,
excluding currency effects.
Even as Kering's high-end goods business faces a more
challenging context, demand for the company's sport and lifestyle
brands--including Puma-- has held up. In the first quarter, sales
at the division rose 3.7% to EUR890 million, outpacing Kering's
luxury division, which saw sales fall by 2.6%.
Mr. Pinault said, in a statement, that he expects a "gradual
improvement" in the company's performance throughout the year.
Write to Nadya Masidlover at nadya.masidlover@wsj.com
Access Investor Kit for LVMH Moët Hennessy Louis Vuitton SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=FR0000121014
Access Investor Kit for Kering SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=FR0000121485
Access Investor Kit for LVMH Moët Hennessy Louis Vuitton SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US5024413065