Sales at French luxury group Kering lagged behind competitors LVMH and Hermès in the first quarter, dragged down by the performance of its wholesale division and North America.
Revenues at the Paris-based group — which owns brands including Gucci and Saint Laurent — grew by 1 per cent to €5.1bn on a comparable year on year basis in the first three months of 2023, far behind Hermès’ 23 per cent and LVMH’s 18 per cent.
However, they compared favourably against the group’s performance at the end of last year. Revenues fell 7 per cent in the fourth quarter, dragged down by zero-Covid lockdowns in China and a provocative ad campaign that backfired at the group’s Balenciaga brand and which hit sales in Europe and North America.
While sales in Kering’s own stores grew by 4 per cent at the start of 2023, wholesale distribution — which the company is working to reduce — dragged the group down. Sales at Gucci, the group’s biggest brand which accounts for half of all group revenues, was broadly flat at the start of the year while those at Saint Laurent grew 8 per cent.
Gucci is in the middle of a turnround following the abrupt departure of designer Alessandro Michele at the end of 2022. New creative director Sabato de Sarno is expected to present his first collection in September as the brand seeks to refocus the design output and increase its timeless product lines.
“Kering’s performance in the first quarter remained mixed, as we had anticipated. As we work to augment the desirability of our brands and raise their profile in key markets, we are encouraged by the gradual improvement in activity month after month during the period,” said chief executive François-Henri Pinault.
The company maintained its momentum in western Europe and Japan, while revenues fell in North America and growth in Asia-Pacific picked up as China recovered.
There was “a clear recovery and acceleration of the Chinese cluster in the quarter . . . while the US is where brands had a challenging quarter,” said chief financial officer Jean-Marc Dupleix. While many Americans did travel and spend in Europe, that was not enough to completely offset the weakness in the US, he added.
While the performance at Gucci — which surpassed €10bn in annual revenues for the first time in 2022 — was not impressive, it beat expectations and may indicate performance is stabilising.
“For the first time in a while [since first quarter 2022], Gucci hasn’t produced a negative surprise,” wrote analyst Luca Solca at Bernstein. “The market knows Gucci is in transition, and is prepared to wait for the new creative director stepping in and reigniting consumer interest for the brand.
“Saint Laurent continues to outperform . . . while it is clear that Balenciaga pays the price of recent social media problems,” he added.