Gucci sales growth remains strong

Good results: A woman walks past a Gucci advertising poster in Hong Kong. Gucci’s fourth quarter was 'remarkable' in light of headwinds from political protests in Hong Kong and higher sales tax in Japan. — Reuters

PARIS: Gucci’s quarterly sales beat estimates as French luxury group Kering’s biggest brand overcame slumping in sales in Hong Kong and reversed its fortunes in the U.S.

The Italian label’s fourth-quarter sales rose 11% on an organic basis, Kering said Wednesday, growing nearly as much as the previous quarter following a year of deceleration. Analysts had predicted 8.6% growth at the brand.

The shares rose as much as 3.1% early Wednesday in Paris.

Gucci’s fourth quarter was "remarkable, ” in light of headwinds from political protests in Hong Kong and a higher sales tax in Japan, Chief Financial Officer Jean-Marc Duplaix said. Kering’s sales fell as much as 50% in Hong Kong as pro-democracy protests prompted mainland Chinese to cancel shopping trips to the financial hub.

Ramped up marketing investments in the U.S., including client outreach and greater visibility in department stores, helped Gucci return to growth in that market. The brand’s U.S. business had turned negative in the middle of the year amid fewer visits from Chinese tourists and as the brand faced criticism for advertising a sweater seen by some consumers as resembling offensive blackface imagery.

Stabilizing growth at Gucci could be seen as a triumph for Kering, which had long promised to deliver a "soft landing” at its flagship brand after several years of breakneck growth.

Other Brands

As Gucci steadily cooled off compared with the nearly 40% growth of 2018, other brands in the Kering stable have helped pick up the slack. Sales of Bottega Veneta’s signature woven-leather shoes and handbags, which got a new look last year under British designer Daniel Lee, jumped 9.4% in the final quarter. Saint Laurent continued to grow by double digits throughout the year.

Still, Kering’s fortunes remain highly dependent on Gucci, which makes up about 80% of profit. Chairman Francois-Henri Pinault has been facing questions from investors on whether the group plans to seek out acquisitions, such as a puffy-coat maker Moncler SpA, to balance the group’s portfolio. Like other luxury companies, Kering is also confronting the effects of the coronavirus, whose spread accelerated after the quarter ended.

"A dependence on Gucci is not problematic, ” Duplaix said by phone. "It’s normal for a luxury group to have one brand in particular that carries it.”

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