PARIS (FRANCE) – French luxury goods group Kering is banking on a marketing drive and fashion events to bolster Gucci to mark the brand’s centenary year, after sales at the flagship label failed to come near forecasts.
Consumers have been restricted from travelling abroad, thereby dampening luxury sales in big shopping centres such as Paris, Milan and New York, in spite of a rebound in demand in Asia, which has helped some high-end brands have recovery in recent months.
Gucci accounts for 60% of revenues and 80% of profits at Kering and has been one among the forerunners in recent years. However, it stumbled in the fourth quarter when compared to increasing revenues at rivals like LVMH’s Louis Vuitton.
Gucci sales fell 10.3% in the quarter on a comparable basis, when analysts were expecting a 4% drop. Kering shares came down just over 7% at 0910 GMT.
However, concerns regarding its slow performance have spiralled speculations that Kering, which also owns brands such as Saint Laurent, might mull over major acquisitions, as a fillip to its portfolio, even as larger rival LVMH has just had an expansion with its $15.8 billion purchase of US jeweller Tiffany.
Kering’s billionaire boss Francois-Henri Pinault rejected short-term concerns over Gucci on Wednesday. It said profitability and sales were likely to recover.
He added Kering was vested with the financial strength to consider purchases and was inclined primarily towards fashion brands with a global reach. However, it said the responsibility was still of building up labels internally.
“We still have a priority for organic growth, starting with Gucci, where we are far away from maturity,” Pinault told a conference call with investors, adding Gucci had had a “very, very encouraging” start to 2021.
Gucci is also busy, amid a revamp of its calendar of catwalk shows and lining up product launches, alongside its 100th anniversary in 2021.
This contributed to a lull in events at the end of 2020, Pinault said.
Pinault said, adding Gucci would be in “always on mode” with a steady lineup of events. Collaborations with other designers on collections are also in the pipeline, as well as revamped handbag designs such as Gucci’s “Bamboo shopper” tote bag.
“We believe Gucci management will work hard to open a successful ‘new chapter’ of growth in the coming year aimed at capturing an older, non-millennial demographic,” Citi analyst Thomas Chauvet said in a note.
Kering’s overall revenue fell 8.2% to 4 billion euros ($4.8 billion) in October-December, down 5% on a comparable basis. It missed analysts’ consensus forecast cited by UBS for 1% growth.
But Kering’s online business grew sharply, accounting for 13% of group retail sales in 2020, up from 7% a year earlier.
There was also a good performance from some smaller brands, with Bottega Veneta growing 2020 sales by nearly 5%.
Group financial chief Jean-Marc Duplaix told reporters that trends across China and Asia as well as the United States remained reaffirming in the first weeks of the year with regard to the luxury market, although Europe was tougher.
He did not give any figures for current trading, including this month’s key Chinese New Year holiday.
