Gucci RTW Fall 2020

PARIS — Kering expects a sharp impact from coronavirus on second-quarter sales, as well as a decline in first-half recurring operating margin, the luxury group said Friday, offering a measure of guidance in a landscape clouded by deep uncertainty. 

“Faced with the worldwide health emergency resulting from the COVID-19 epidemic, the health and safety of the teams at Kering and its houses are the group’s utmost priority,” said the group, which owns fashion houses Gucci, Balenciaga, Alexander McQueen and Saint Laurent, among others.

Consolidated revenue for the first quarter ending March 31 will likely be down between 13 and 14 percent, or 15 percent in comparable terms, compared to the same quarter last year, Kering said.

Second-quarter revenue this year will likely be “sharply impacted by the effect of the epidemic on local clienteles and tourism,” and first-half recurring operating margin will likely decline, though it is too early to quantify, the company added, citing the fast-moving situation and current lack of visibility.

The group is seeing “encouraging signs” in Mainland China, and described declines in store traffic and sales there as “narrowing.” However, the impact remains significant in other markets of the Asia Pacific region, while the situation has “substantially deteriorated” in recent weeks in Western Europe and more recently in North America, it also said.

The group is putting together an initial action plan to adapt its cost base and contain working capital requirements, it said.

Kering is also looking at additional moves to protect recurring operating margin throughout the year while preserving market positions and growth potential of its brands so they can “bounce back” in the short and medium term, it added.

First-quarter revenue will be released on April 21.

“The epidemic does not call into question the structural drivers of the luxury industry,” Kering said. The group has confidence in medium- and long-term growth prospects, it also said, citing the strength of its business model, financial health and discipline. 

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