PARIS — Quirky Seventies chic at Gucci and Rihanna’s Fenty trainers at Puma helped Kering to a solid first quarter in a persistently challenging environment.
The French parent company of such brands as Saint Laurent, Balenciaga and Brioni grew less than analysts expected, but still made advances in its luxury and sports divisions. Kering reported group sales rose 2.7 percent in the first quarter to 2.7 billion euros, or $2.97 billion. On a comparable basis, sales were up 4 percent in the period.
Speaking on a conference call with analysts on Thursday, Jean-Marc Duplaix, Kering’s chief financial officer, said the impact of Gucci’s collections under the creative helm of Alessandro Michele was “immediate.”
“They resonated particularly well with a local clientele,” he said after Gucci logged a 2.9 percent gain in reported terms, or 3.1 percent on a comparable basis, in the three months ending March 31.
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Analysts at Barclays and the Royal Bank of Canada had originally expected the brand to advance 5 and 6 percent, respectively.
At retail, which accounts for 82 percent of the brand’s sales, Gucci grew 3 percent driven by a strong performance in Western Europe, up 20 percent in the quarter.
While the label lost in North America and the Asia-Pacific region, it also advanced in Japan, up 1 percent, where for the first time it appealed to a younger local consumer, Duplaix revealed, adding that the rejuvenated offer already accounted for about 50 percent of sales.
“Michele’s collections are performing well across all categories and are improving month after month in an environment that has not helped. The share of newness should increase to two-thirds in the second quarter and constitute 100 percent by yearend,” he said.
Overall the company’s luxury activities saw revenues rise 2.8 percent to 1.8 billion euros, or $1.98 billion, while the sport and lifestyle division registered a 2.6 percent increase to 913 million euros, or $1 billion.
All dollar rates are calculated at average exchange for the period in question.
On a comparable basis, luxury was up 2.6 percent, while sport and lifestyle rose 7 percent, helped by an 8.1 percent increase at Puma.
“Puma had a strong start into the year. The revenue was positive across all categories, led by footwear, up 10 percent on comparable terms,” the executive noted, adding that the launch of Rihanna’s Fenty trainers helped business and provided good momentum in the firm’s women’s division.
The difference between comparable and reported growth at Puma was attributable to negative foreign exchange rates in emerging countries, especially Latin America and Russia where local currencies strongly depreciated against the euro.
Saint Laurent again saw double-digit increases, up 27.3 percent in the quarter. Following the departure of Hedi Slimane earlier this month, Duplaix assured that “the succession was well prepared and the foundation was strong.”
“We are highly confident as we open a new chapter in Saint Laurent’s history,” he said, pointing to Saint Laurent’s new creative director Anthony Vaccarello.
Sales at Bottega Veneta were down 7.6 percent to 267 million euros, or $294 million, as the brand continues to shift its focus to local consumers and new leathergoods lines that are to include more entry-price items.
“Bottega had strong headwinds in Q1,” the cfo acknowledged, blaming a slowdown in tourism flows, particularly in Western Europe, following the November terrorist attacks in Paris; the brand’s overexposure in Hong Kong and Macao, where luxury sales have been sluggish, and the strength of the U.S. dollar for the negative results.
He divulged that the company was taking initiatives to recapture the local Asian consumer, adjusting retail prices by between 10 and 13 percent in the region. On a more positive note, he highlighted that the rejuvenating efforts in Bottega’s leathergoods category were starting to bear fruit, singling out the Olimpia bag, launched in late 2015, as one of the label’s bestselling styles. The brand’s footwear also posted “good results,” he said, following investments in the category.
Kering’s “Other Luxury” businesses put on a mixed show. The segment was down 2.9 percent in reported terms, as strong performances at Stella McCartney, Alexander McQueen and in the group’s jewelry division could not offset weakness in watches and at Brioni, which is in the midst of a total makeover.
Shares closed down 1.3 percent. Thomas Chauvet of Citi said he expected shares to be under pressure in the near-term. He most notably voiced his concern over Bottega Veneta’s second consecutive quarter in negative category, calling it “worse than expected,” but overall said Kering held up relatively well vis-à-vis its peers, including LVMH Louis Vuitton Moët Hennessy and Burberry.