PARIS – Kering said revenues rose 12 percent in the third quarter as its luxury sales benefited from a massive influx of tourist shoppers in Western Europe and Japan, compensating for a slowdown in Mainland China.
Revenues totaled 2.89 billion euros, or $3.22 billion, in the three months ended Sept. 30. Stripping out currency effects, sales were up 3.1 percent in the quarter, beating a consensus forecast for a 2.8 percent increase, according to Luca Solca, managing director at Exane BNP Paribas.
“Kering breaks a series of disappointing updates by luxury goods companies started last week,” he said in a research note.
The French conglomerate, whose brands include Gucci, Puma, Balenciaga and Boucheron, said the quarter was characterized by sharp contrasts between regions.
Comparable sales rose 29 percent in Western Europe and 26 percent in Japan, but they were down 12 percent in Asia Pacific and 7 percent in North America, where the strong dollar deterred tourists from visiting the United States.
Kering chairman and chief executive officer François-Henri Pinault credited strong tourist flows elsewhere and momentum in directly operated stores with delivering a healthy performance for the luxury goods segment, boosted by another quarter of exceptional growth at Saint Laurent.
“I look ahead to the final three months of the year with confidence in our brands’ development potential and in the group’s ability to maintain its growth trajectory,” he added.
Jean-Marc Duplaix, chief financial officer at Kering, said sales to Chinese customers on a worldwide basis decelerated across most of its brands in the third quarter, although the year-to-date trend remained positive in the luxury division.
“The rebalancing of purchases in Europe and Japan did not fully offset the deterioration witnessed in Hong Kong and Macau and the temporary drop in South Korea, still because of the MERS syndrome,” he told analysts in a conference call after the close of the Paris Stock Exchange on Thursday.
“I would add also that in Mainland China, the trends are still also negative and we don’t see so far any major improvement,” he added, noting sales during the Golden Week national holiday from Oct. 1 to 7 only gained momentum in the second week of the month.
Organic sales at Gucci, which accounts for more than a third of total revenues at Kering, fell 0.4 percent during the third quarter, following a 4.6 percent rise in the prior quarter, driven in part by markdowns on old collections.
But Pinault expressed confidence in the turnaround engineered under president and chief executive officer Marco Bizzarri and creative director Alessandro Michele.
“The implementation of our action plan at Gucci is moving forward. Our new collections were enthusiastically acclaimed, confirming the highly promising course the brand has now embarked on,” he said.
Duplaix noted the strong reception for the brand’s new handbag lines, in particular the Dionysus, introduced in July. “We are particularly pleased to see new customers buying these products, many of them younger and first-time clients of the brand,” he said.
He added that orders for the spring 2016 collection, presented in Milan last month, posted a double-digit increase versus spring 2015, with handbags a standout.
Gucci earlier this week relaunched its Web site in North America and will roll out the redesign to Europe and Asia in the next few months.
The brand unveiled a new store design at its Via Montenapoleone boutique in Milan this fall, with a total of 30 stores worldwide to follow. It has also collaborated with specialty stores including Dover Street Market in Tokyo, New York and London and Boon the Shop in Seoul on temporary installations.
Breaking the rules of the fashion calendar, Gucci began showcasing Michele’s first full collection, cruise 2016, in key stores in mid-September. Resort collections usually start to be delivered to stores around November.
However, Duplaix cautioned that the new collection would still account for less than 50 percent of Gucci’s sales in the fourth quarter.
Retail sales at the brand were up 1 percent in the third quarter, reflecting the impact of the transition period in terms of products, while wholesale was down 6 percent.
Duplaix said he expected Gucci’s wholesale revenues to decrease by a similar rate in the fourth quarter, reflecting the brand’s ongoing purge of the channel. Going forward, retail and wholesale trends should be aligned, he added.
Kering’s luxury activities saw revenues rise 14 percent to 1.89 billion euros, or $2.1 billion, in the third quarter. All dollar rates are calculated at average exchange rates for the period concerned.
Meanwhile, the sport and lifestyle division registered an 8.4 percent increase to 999 million euros, or $1.11 billion, with sales at Puma progressing 5.9 percent on a comparable basis. “The turnaround is a reality,” Duplaix said of the long beleaguered German sporting goods firm.
On a comparable basis, luxury was up 3.1 percent, while sport and lifestyle rose 3.4 percent.
Revenues at Bottega Veneta were up 4.3 percent on a comparable basis to 324 million euros, or $360.4 million, hampered by the brand’s exposure to Hong Kong and Macau. Kering aims to narrow price differentials exacerbated by currency swings, and has beefed up development teams for the rtw and shoe categories.
Saint Laurent saw revenues grow by 26.6 percent on a comparable basis to 243.4 million euros, or $270.8 million. Retail sales were up 32 percent in the quarter, with even Mainland China recording a sharp increase, a testament to ongoing customer demand for the brand’s $5,000 biker jackets and $2,000 monogram satchels.
Reflecting the increasing role of Saint Laurent and Bottega Veneta in the group’s growth, Kering said it was appointing Saint Laurent ceo Francesca Bellettini and Bottega Veneta ceo Carlo Alberto Beretta as new members of its executive committee, effective immediately.
Revenues at the group’s other luxury brands were down 1 percent on a comparable basis, despite solid demand at Balenciaga, Alexander McQueen and Stella McCartney.
The division was dragged down by volatility at men’s tailoring brand Brioni and continued destocking by watch distributors in Eastern Europe and Asia, which impacted Ulysse Nardin and Girard-Perregaux.
Kering group managing director Jean-François Palus noted that its eyewear division should start generating revenues earlier than initially planned. The group surprised the industry last fall with the news that it would bring its eyewear production and distribution in-house.
“We think that next year, Saint Laurent and Bottega will make the most of this initiative, because they were those who took the biggest orders and so they will benefit from that as early as next year. In 2017, the integration of Gucci will give us a real kick and will have a real impact on our performance,” Palus said.
In response to an analyst’s question, he said the merger of Net-a-porter and Yoox, with which Kering has an e-commerce joint venture, would have no impact either on the joint venture or the trading of its brands with Net-a-porter and Mr Porter. He added that Kering has not considered becoming a shareholder in the new entity.
The third-quarter figures come on the heels of LVMH Moët Hennessy Louis Vuitton reporting last week that sales rose 7 percent in the third quarter, with a marked slowdown in organic growth in its key fashion and leather goods division.
Meanwhile, Burberry shocked markets by reporting that same-store sales fell 4 percent in its financial second quarter, recording their first quarterly decline since 2009.