PARIS — Less logo seems to be the way to go as Europe’s luxury giants face cooling demand.
Kering, which on Thursday reported third-quarter revenues dipped 1.5 percent to 2.52 billion euros, or $3.34 billion, said it would continue to push leather lines instead of canvas for its core Gucci brand, which saw sales fall 5.4 percent in the three months to Sept. 30.
Gucci sales dipped 2 percent in Asia-Pacific, a linchpin market for luxury, reflecting efforts to drive the brand upscale and make it more exclusive, partly by reducing volumes of entry-price logo luggage and small leather goods.
Jean-Marc Duplaix, Kering’s chief financial officer, told a conference call that close to 70 percent of all Gucci handbags sold in the third quarter were leather, a big jump from a year ago, when the leather ratio was less than 50 percent.
He detailed contrasting demand for logos in various regions. No-logo handbags represent only 40 percent of Gucci’s business in Asia-Pacific, versus 70 percent in Japan, a market that has often been at the cutting edge of luxury consumption.
“It’s a good indication of what could be the global balance in the long term,” Duplaix said. “We are confident it is the right way to steer the brand.”
Overall, no-logo products accounted for 55 percent of Gucci handbag sales in the third quarter, 20 points above the same period last year, he added.
Releasing its figures after trading had ceased on the Paris bourse, Kering added to evidence that luxury is losing steam. Its third-quarter decline represents a slowdown from the second quarter, when revenues grew 1.6 percent, and dovetail with lackluster results at LVMH Moët Hennessy Louis Vuitton, which last week said third-quarter revenues rose 1.7 percent.
LVMH also said it would continue to emphasize high-end leather goods at its cash-cow Louis Vuitton brand as a way to pep up business and secure its luxury positioning.
Sales at Kering’s luxury division gained 1.5 percent in the third quarter to 1.62 billion euros, or $2.14 billion. Stripping out the impact of currency and acquisitions, the gain in luxury stood at 5.6 percent.
Dollar figures are converted from euros at average exchange rates for the periods in question.
The company blamed the softer trends in luxury and a deceleration from the first half mainly on Gucci’s upscaling drive, which includes trimming out wholesale accounts, and “a more volatile” environment for hard luxury, particularly watches.
Wholesale volumes at Gucci were down 9 percent, compared to a 4 percent gain in company-owned retail stores. The brand singled out its no-logo leather lines Bamboo Shopper and Lady Lock for a 6 percent gain in retail sales of handbags.
Revenues at Bottega Veneta gained 7.3 percent in the quarter, with Greater China leaping almost 30 percent.
Hedi Slimane’s rock ’n’ roll-fueled makeover at Saint Laurent logged a 7.2 percent increase in the quarter, with the ready-to-wear category and Japan both up 41 percent. Duplaix noted “high volumes” of editorial helped boost the brand’s momentum.
Other luxury brands posted a 15.3 percent gain, reflecting the acquisition of Italian jeweler Pomellato, which Kering completed last July. On a comparable basis, other brands gained 9.4 percent, with Stella McCartney and Alexander McQueen posting double-digit growth, and Balenciaga, now under the designer leadership of Alexander Wang, showing an acceleration in the quarter, particularly with rtw and shoes.
Asked if Kering was on track to dispose of its remaining retail holding, the La Redoute catalogue business, Jean-François Palus, group managing director, said, “We continue to discuss with potential buyers. We are on our way to consummate a transaction before the end of the year.”
Duplaix also acknowledged Kering “could contemplate a disposal” of a luxury or sport-lifestyle brand if it was “not capable of reaching its long-term potential.” He did not name specific brands.
Revenues in sport and luxury, with Puma the division’s largest franchise, fell 7.6 percent to 896.2 million euros, or $1.19 billion. The group blamed the decline on adverse currency effects, weak demand for Puma footwear, and sluggish trends in Europe, Puma’s largest market. On the plus side, Duplaix trumpeted positive like-for-like sales at Puma’s mainline stores and a 7 percent bump in apparel sales in the quarter.
François-Henri Pinault, Kering’s chairman and chief executive officer, said that Puma’s new management team would “radically transform Puma and restore the brand’s powerful position.”
The company gave no specific guidance for the rest of the year, although Pinault said, “We remain confident in our performances for the year as a whole.”