Tuesday, 28 July 2020

Gucci owner Kering's sales plunge, but Bottega Veneta sees smaller drop



French luxury group Kering said on Tuesday that second-quarter comparable sales had plunged by 43.7% due to the coronavirus pandemic, adding it could not provide a forecast for the second half of the year despite an encouraging recovery in Asia.

The sales drop at the conglomerate that owns Gucci was a touch better than analyst expectations, with those at UBS citing a consensus for a 46% fall. Rival LVMH managed to limit its own sales decline to 38%, though its operating margins were hit hard, limping in at 9% while Kering's shrank to 17.7%.

Kering said in a statement that it lacked enough visibility to forecast revenue trends or margins for the rest of the year, while Chief Financial Officer Jean-Marc Duplaix told reporters the absence of tourist flows would weigh on the industry for some time yet. "The loss in revenue experienced in the first six months of the year should not be offset in the second half," the company said.

Kering said it was cutting costs, while not canning investments in its brands altogether, which usually spend heavily on marketing campaigns and key events such as fashion shows that give them massive visibility.

Sales at Kering's top brand Gucci in the April to June period declined by 45% on a like-for-like basis, which strips out the impact of currency swings and acquisitions. Yves Saint Laurent suffered an even bigger fall of 48% while recovering Bottega Veneta contained the drop in revenue to only 24.4%.

Like rivals, Kering had to temporarily close shops and put manufacturing sites on stand-by as the virus spread from the key Chinese market to Europe and the United States.

Its online sales bounced, however, and accounted for 18% of revenue in the second quarter, up from under 10% at the start of the year, Duplaix said.

Shares in Kering closed down 2.7% on Tuesday ahead of the release, dragged down by investors' disappointment with the bigger-than-expected drop in core profits at LVMH.

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