PARIS – Kering said sales fell 8.2 percent in the fourth quarter, dragged down by a worse-than-expected performance at its star brand Gucci.
The French luxury conglomerate reported on Wednesday that revenues in the three months to Dec. 31 totaled 4.0 billion euros, representing a decline of 5 percent in comparable terms, with the company noting a “sharp rebound” in sales in the second half of 2020, led by North America and Asia-Pacific.
The sales drop came on the heels of a 4.3 percent decline in the third quarter.
Organic sales at Gucci fell 10.3 percent in the fourth quarter, compared with an 8.9 percent drop in the prior three months, and a rise of 10.5 percent during the same period in 2019, before the coronavirus pandemic closed stores and brought travel to a halt.
The figures fell short of a consensus of analyst estimates, which had called for a 2 percent fall in overall comparable sales to 4.18 billion euros. Like-for-like sales at Gucci had been forecast to drop 8 percent.
Luca Solca, analyst at Bernstein, said Kering’s share price should take a hit as growth also slowed at its smaller brands, Bottega Veneta and Saint Laurent. “We expect market pressure to increase on Gucci to produce efforts aimed at reinstating momentum,” he said in a research note.
Kering said net profit fell 38.6 percent to 1.97 billion euros in 2020, while recurring operating income plummeted 34.4 percent to 3.14 billion euros.
By comparison, sector leader LVMH Moët Hennessy Louis Vuitton last month reported a 3 percent decline in organic sales in the fourth quarter, although its key fashion and leather goods division recorded an 18 percent jump in revenues, led by Louis Vuitton and Dior. Hermès International is scheduled to report full-year results on Friday.
“We achieved a solid top-line recovery in the second half, we protected our margins while continuing to invest in our houses and growth platforms, our cash flow generation remained elevated, and we further strengthened the group’s financial structure,” François-Henri Pinault, chairman and chief executive officer of Kering, said in a statement.
“We are emerging from the crisis stronger and better positioned to leverage the rebound. We invest in all our brands to maximize their potential, and to resume our profitable growth journey,” he added.
Gucci, which has been pruning its wholesale network as part of a drive to increase the desirability of the brand, has had to pivot from a reliance on sales to Chinese tourists towards courting more local customers in markets like Western Europe and Asia.
Meanwhile, the group’s other brands also showed slowing growth.
Comparable sales at Bottega Veneta were up 15.7 percent in the fourth quarter, compared with a 20.7 percent rise in the previous three months. Organic sales at Saint Laurent were up 0.5 percent, compared with a 3.9 percent rise in the prior quarter.
Like-for-like sales at other houses, a division that includes Alexander McQueen and Balenciaga, were up 1.7 percent, versus a rise of 11.7 percent in the third quarter.
The board of directors has proposed a dividend of 8 euros per share for 2020, down from 11.50 euros the previous year.
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