Gucci joins luxury goods rebound, boosting Kering sales

Sales of high-end fashion and handbags are soaring again as vaccinations progress and stores re-open, although new coronavirus lockdowns in much of Europe are holding back momentum there, while international travel is still on ice.

The Kering conglomerate's overall sales rose and Gucci, which accounts for 60% of Kering's revenues and 80% of its profits, posted comparable revenues up by 24.6%, ahead of analysts' consensus forecast for 19% growth.

That is likely to soothe investor concerns that the brand is losing steam after five years of stellar growth, after it lagged some major rivals in 2020.

But fashion labels at Kering’s arch-rival LVMH’s (LVMH.PA), which include Louis Vuitton, performed even more strongly in the first quarter, and Bernstein analyst Luca Solca said this could potentially weigh on Kering’s shares.

Gucci is hoping to capitalise on its centenary year to attract fans with events and new collections, including one presented online last week where Gucci designs were crossed with silhouettes and logos by Balenciaga, another Kering brand.

The show has had 205 millions views online, Kering Finance Chief Jean-Marc Duplaix told reporters, adding it confirmed renewed momentum at the brand.

Harry Barnick, a senior analyst at research firm Third Bridge, said the catwalk show could help create buzz with some key customers.

"This is likely to be particularly successful in China," Barnick said.

WESTERN EUROPE LAGS

Duplaix said Kering planned to invest to help boost momentum at Gucci this year, although the group would remain disciplined on costs and margins.

For group as a whole, which also includes Saint Laurent, Kering posted sales up by 83% in the Asia Pacific region and by 46% in the United States in the three months to March from a year earlier.

In Western Europe, however, sales fell 34%. Duplaix said the hit was most marked in some countries which had spent much of the quarter under a strict lockdown, such as the United Kingdom.

More than half of Kering's European stores were closed in the first quarter, and that number increased at the beginning of April due to fresh lockdowns in France and Italy, Duplaix added.

Overall revenues reached 3.89 billion euros ($4.69 billion)in the quarter, up 25.8% when stripping out exchange rate swings and acquisitions. They were up 5.5% like-for-like compared with pre-pandemic levels in the first quarter of 2019.

Some of the Paris-based conglomerate's other labels also performed well, including Bottega Veneta, which Kering has been trying to revive under a new designer after several years of faltering sales.

E-commerce was also up sharply - with online sales now accounting for 14% of the total - as luxury shoppers become more comfortable buying pricey goods remotely.