Mixed Q2 results for Kering

France
Published:  01 August, 2014

Kering posted mixed first-half results that showed further weakness at its flagship Gucci brand. The company said that trends remained negative in mainland China, where Gucci was in the final phase of appointing a new chief executive. 

However, business in China had improved since the end of last year, notably in big cities. In Europe luxury consumption was "sluggish," which Kering Chief Financial Officer Jean-Marc Duplaix attributed in part to a drop in traffic from Japanese and Russian tourists and slowing spending by Chinese tourists.

Gucci sales, which many analysts had expected to remain flat in the second quarter, fell 2.4% on a like-for-like basis and were down 5.7% on a reported basis.

Last week, industry leader LVMH spooked investors with below-forecast profits and a severe slowdown at Louis Vuitton, whose sales growth collapsed to zero after enjoying a 9% rise in the first quarter.

Kering Chief Financial Officer Jean-Marc Duplaix said Gucci's same-store sales "were also slightly negative" in the second quarter and the brand's operating margin had lost 20 basis points in the first half against the same period last year and was now 31.5%.

One analyst said of Gucci's performance. "This probably means Gucci senior management is continuing to improve the quality of the brand's distribution, and weeding out questionable accounts."

However, Kering's total like-for-like luxury sales rose 5.2% during the period - beating analysts' forecasts of 3-4.5% - helped in part by strong growth at fashion brands Yves Saint Laurent and Bottega Veneta.

Including revenues from Kering's sports brands, second-quarter sales reached €2.35 billion ($3.1 billion), broadly in line with market expectations.

Kering's German sportswear firm Puma on July 29 said sales of World Cup soccer boots and national team shirts as well as new Arsenal jerseys beat its expectations as it reported second-quarter earnings that fell less than feared.