PARIS — Kering believes there is no single cure for the currency swings roiling the luxury market.

This story first appeared in the April 22, 2015 issue of WWD. Subscribe Today.

Even as its rival Chanel harmonizes prices worldwide to neutralize growing differentials between regions, the parent company of Gucci, Puma and Bottega Veneta is taking a more nuanced approach.

“We are addressing this in a balanced way,” Jean-Marc Duplaix, Kering’s chief financial officer, told analysts in a conference call after the group reported sales rose 11.4 percent in the first quarter to 2.65 billion euros, or $2.99 billion, boosted by “massive” currency tailwinds.

But the group’s core luxury operations remained under pressure. On a comparable basis, sales were down 0.6 percent in the quarter, dragged down by the ongoing turnaround at Gucci under new chief executive officer Marco Bizzarri and creative director Alessandro Michele.

“Taken together, currency swings, tourism flows and internal transparency are rapidly creating a new landscape for global brands, and as a group we have the resources to turn this into an opportunity,” Duplaix affirmed.

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“On the one hand, we don’t believe that a pure ‘wait-and-see’ attitude is a realistic option, considering growing price transparency. Conversely, we are not convinced that the rigid harmonization or uniformization of prices across all markets is the way to go,” he said. “We are looking at the situation brand by brand, and market by market, and working on all levers at our disposal. Adapted pricing strategy can be part of the answer for some products in some regions. It can be combined with other options, such as a tactical review of the collection structure along with — if relevant — internal actions to smooth the price differential impact.”

Kering’s luxury activities saw revenues rise 10.9 percent to 1.75 billion euros, or $1.98 billion, while the sport and lifestyle division registered a 12.7 percent increase to 890 million euros, or $1 billion. All dollar rates are calculated at average exchange rates for the period concerned.

On a comparable basis, luxury was down 2.6 percent, with Gucci logging a 7.9 percent decline, while sport and lifestyle rose 3.7 percent, helped by a 4.5 percent increase at Puma. “Trends in luxury were softer than in prior quarters and, for several reasons, were far from representative of what we expect in the balance of the year,” said Duplaix.

Luxury sales in Japan were hit by a sharp comparison basis with the first quarter of 2014, when consumers anticipated purchases ahead of a rise in value-added tax. Meanwhile, ongoing pro-democracy protests dented revenues in Hong Kong and Macau, which account for 19 percent of retail sales at Bottega Veneta, to name one example.

Nearly all brands in Asia were affected by the foreign exchange swings, he noted.

“Sharp currency moves in the quarter had an impact on sales, as some of our clients delayed purchases. We are actively monitoring the swings in tourism flows that are dictated by currency changes, and in particular, we are preparing for the impact of an increase in inbound tourism in Europe in the next months. However, at this stage, it’s still difficult to quantify the net impact of this dynamic,” he added.

Duplaix said the group’s margins would doubtless come under pressure in the first half because of the currency hedging impact.

The executive said he could not confirm reports of a sharp growth in the parallel market for luxury goods as a consequence of the weak euro, though he acknowledged it was a concern.

“It’s an issue for the industry, it’s an issue for our brands. We are facing this issue by working on the distribution, by safeguarding the exclusivity of our distribution, by accelerating the launch of Web sites in China, in Chinese, with the possibility to pay in Chinese currency,” he said.

Regarding Gucci, Jean-François Palus, group managing director at Kering, said it was unrealistic to expect the new hires to have an impact on first-quarter sales.

“This industry has a slow metabolism,” he cautioned. “We are very pleased with what the team is doing, with the new organization, the new ways of working and the new ideas that they have, and so we are confident that this will bear fruit in the near future.”

François-Henri Pinault, Kering’s chairman and ceo, earlier this year said Gucci could see a turnaround as early as the second half of 2015, when Michele’s first collections will be delivered to stores.

In the meantime, the maker of horsebit loafers and Jackie handbags has deliberately terminated some wholesale accounts, in particular in Europe, and held back shipment of the final collection designed by Michele’s predecessor, Frida Giannini.

“We have deliberately decided not to ship some products this quarter in order to avoid a disappointing sellout for our wholesale accounts with a product coming from the old design,” Duplaix explained.

As a result, Gucci’s wholesale revenues were down 23 percent in the first quarter. Retail sales, which account for 83 percent of revenue, fell 4 percent on a comparable basis, with Western Europe up 6 percent and North America flat, but Japan down 9 percent and Asia Pacific losing 10 percent.

Among the measures to be implemented at Gucci in coming months is a reduction in the number of sku’s; the upgrading of products bearing the GG logo; a refreshment of the store network, with new finishes for floors, counters and displays; improved assortments, and the creation of a “unique” omnichannel structure, Duplaix said.

“Before the end of the third quarter, Gucci will have launched a new best-in-class front-end platform enabling the timely rollout of new functionalities in this field,” he said of the group’s plans for growing e-commerce.

Revenues at Bottega Veneta were up 3.1 percent on a comparable basis in the quarter to 290 million euros, or $327 million.

Retail sales in North America were flat, a situation Kering hopes to remedy by adding more U.S. department store accounts this year to increase the brand’s visibility. Sales in Bottega’s stores in Western Europe, however, registered a 34 percent jump, boosted by heavy tourism flows on the back of the weaker euro.

Saint Laurent saw revenues grow by 21.2 percent on a comparable basis to 211.4 million euros, or $239 million. Sales in directly operated stores increased 39 percent in North America, 29 percent in Western Europe and 22 percent in Japan.

Revenues at the group’s other luxury brands were down 4.5 percent on a comparable basis, dragged down by a double-digit decrease at jeweler Boucheron and a subdued performance at watch brands such as Ulysse Nardin, hit by the ongoing political crisis in Russia.

Balenciaga again saw double-digit sales increases across retail and wholesale, while Stella McCartney and Alexander McQueen both posted “vigorous” growth.

Meanwhile, revenues at Puma totaled 825 million euros, or $931 million, driven by strong momentum in its footwear category.

The figures came on the heels of a 16 percent rise in revenues at rival luxury group LVMH Moët Hennessy Louis Vuitton during the period. Hermès is due to report first-quarter sales next week.

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