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Kering said growth at Saint Laurent and an uptick in American shoppers in Europe buoyed sales in the second quarter, even as revenues at its biggest brand Gucci slowed.
The luxury conglomerate said second-quarter sales at megabrand Gucci rose 4 per cent, a slowdown on the prior quarter’s 13.4 per cent gain and below overall group sales, which increased 12 per cent.
By comparison, rival LVMH’s fashion and leather groups division reported sales rose by 19 per cent in the second quarter, while Richemont sales gained by 12 per cent in the period.
Luxury sales in the second quarter have been under pressure from ongoing lockdowns in China, while also navigating a macro environment marked by surging inflation and fear of recession. Kering said Asia-Pacific retail revenues fell 15 per cent, the worst performer, with almost a third of Kering-owned stores in China closed in April and May. Still, good news came from Saint Laurent, which surged 31 per cent (above consensus of 17.3 per cent) and growth in demand from locals and a “nascent rebound” in tourists in Europe, Kering said.
Kering's first quarter sales grew 21 per cent, but continuing lockdowns in China cast a shadow.
“Gucci remains in transition, Saint Laurent rocks,” Bernstein analyst Luca Solca wrote in a note following the results. “Gucci produced numbers broadly in line with muted consensus expectations. Clearly, the recently announced changes to the Gucci creative and merchandising organisation have yet to produce any effects.” Gucci announced in its Capital Markets Day presentation the newly established role of design studio director dedicated to oversight of main collections as well as a new role spearheading merchandising (Maria Cristina Lomanto was appointed EVP, brand general manager) and a new dedicated high-end category team. A brand elevation focus includes clienteling and communications activity, price rises and a new high jewellery collection in June.
Kering’s Other Houses division, which includes Balenciaga and Alexander McQueen, reported sales rose by 24 per cent, above consensus expectations of 17.3 per cent.
“The group delivered sharply higher sales in the first half of 2022, sustaining last year’s topline momentum — solid performances in retail around the world more than offset the impact of Covid-related measures in China in the second quarter. We intensify our engagement with local customers across all markets, and we are also leveraging the nascent rebound in tourism in Europe,” François-Henri Pinault, chairman and CEO, said in a statement.
Western Europe and Japan drove growth, with retail sales up 94 per cent and 45 per cent, respectively. The US rose 8 per cent. Quizzed by analysts about China specifically, CFO Jean-Marc Duplaix said the market was overall down 30 to 35 per cent on average in the second quarter for luxury houses.
On the US, Duplaix was reluctant to identify trends. “Clearly, it’s a little bit too early to flag any evolution of the US market,” he said, noting a high comparison basis with the same period last year and the strong return of American shoppers to Europe.
“We are investing in strengthening the structure dedicated to the development of main collections,” said Jean-Francois Palus, Kering group managing director. “A senior member of the studio, who’s been working with us for a long time, will take the new role of studio director, aiming at overseeing the team and reporting to Alessandro [Michele, creative director].”
Duplaix noted the relaunch of a leather goods travel offer at Gucci, describing it as a “resounding success” that has helped Gucci “reclaim its position in this important sub-segment of leather goods, especially for men”.
Kering Eyewear sales rose 17 per cent in the second quarter. Beyond eyewear, beauty is on the radar for development: Kering currently operates through licenses with Coty for Gucci and L’Oréal for Yves Saint Laurent. “Our success with Kering Eyewear demonstrates that we can create a lot of value for the brands by taking some disruptive and innovative approaches. So beauty is definitely an area we could contemplate in the future,” says Duplaix. “All options are open.”
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