François-Henri Pinault, Kering

Kering chairman and CEO François-Henri Pinault confirmed he expects a turnaround despite a disappointing first-quarter performance.

PARIS — Kering chairman and chief executive officer François-Henri Pinault confirmed Thursday that he expects a turnaround at Gucci in the second half of 2015, despite a disappointing first-quarter performance.

This story first appeared in the April 24, 2015 issue of WWD. Subscribe Today.

“We will see already in the second half very noticeable signs of improvement in Gucci’s business,” Pinault told shareholders at the group’s annual general meeting.

Kering earlier this week revealed Gucci’s comparable sales were down 7.9 percent in the first quarter as the company undertakes a turnaround under new ceo Marco Bizzarri and creative director Alessandro Michele.

Overall, Kering reported sales rose 11.4 percent in the first quarter to 2.65 billion euros, or $2.99 billion, boosted by “massive” currency tailwinds. On a comparable basis, group sales were down 0.6 percent in the quarter. Stripping out the impact of exchange rate variations, as well as acquisitions and disposals, sales in the luxury division were down 2.6 percent.

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Pinault said the maker of horsebit loafers and Jackie handbags needed to “catch its breath” after a lengthy growth period ran out of steam in 2012. He noted the impact of sales from Michele’s first collections should be felt in group results from November.

The executive was also questioned about how Kering — whose portfolio includes luxury brands such as Bottega Veneta, Saint Laurent and Balenciaga — is dealing with the vast price differentials caused by recent currency swings, which are prompting Asian customers to defer purchases and buy products in Europe instead.

Pinault expanded on the “brand-by-brand and market-by-market” policy sketched out earlier in the week by Jean-Marc Duplaix, Kering’s chief financial officer, saying pricing policy would be based on each brand’s product mix.

“Certain products from certain brands will have a universal price,” he said, citing the example of Bottega Veneta’s new Olimpia handbag, which was launched in China in April and will be rolled out in the rest of the world in May.

“Others will be lowered [in Asia] and raised in Europe — limited increases in order to preserve the local clientele. And other products, because they belong to the novelties, will be adjusted systematically from one season to the next,” he explained. “Our priority is to preserve the margin in absolute value of all of our brands.”

Pinault said a certain price differential between Asia and Europe was to be expected, as this reflected differences in value-added tax, as well as transport costs and import duties.

“This is not something likely to shift purchases from one country to another. So that seems perfectly healthy to us. What is not healthy is when exchange rates move this sharply and the [price] gap, instead of being around 30 percent, which is a fairly natural level, rises to 60 percent or even 70 percent, which is the case today,” he said.

Though Kering saw a slowdown in revenue growth last year, reflecting a general deceleration in luxury sales, shareholders approved a big bump in Pinault’s pay package. His 2014 salary totals 5.46 million euros, or $7.25 million, up from 4 million euros, or $5.3 million, the previous year.

This includes a fixed salary of 1 million euros, or $1.33 million, variable pay of 939,000 euros, or $1.25 million, a long-term performance bonus worth 2.65 million euros, or $3.53 million, in addition to other benefits. All dollar rates are calculated at average exchange rates for the period concerned.

Underscoring the group’s commitment to sustainability, Marie-Claire Daveu, chief sustainability officer and head of international institutional affairs at Kering, said it would publish its first Environmental Profit & Loss account in May, one year ahead of schedule.

She also revealed Kering would coproduce “La glace et le ciel” (“Ice and Sky” in English), a documentary by French director Luc Jacquet — famed for “March of the Penguins” — that will focus on French scientist Claude Lorius, who has taken part in countless polar expeditions.
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