Kering SA reported second-quarter revenue that exceeded analysts’ estimates as surging demand for Saint Laurent dresses helped compensate for falling sales of Gucci handbags. Much like its Parisian rival, Louis Vuitton, Gucci has been undergoing a revamp, following the market saturation of its logo-centric goods. While Louis Vuitton has since bounced back (to some extent), Gucci sales, which many analysts had expected to remain flat in the second quarter, are still trailing. Sales fell 2.4 percent on a like-for-like basis and were down 5.7 percent on a reported basis. 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 percent. Gucci is introducing more expensive goods and refurbishing stores as it seeks to attract shoppers who want products few others have. The strategy is hurting sales in Asia, where market conditions are difficult, Kering Chief Financial Officer Jean-Marc Duplaix said on a conference call.
Kering also announced today that it agreed to buy all of Swiss watchmaker Ulysse Nardin. Sales climbed 4 percent on a comparable basis, Paris-based Kering said today in a statement after European markets closed. Analysts predicted 3.1 percent growth, according to the median of 20 estimates compiled by Bloomberg. First-half recurring operating income fell 3.9 percent to 810 million euros, ($1.08 billion), compared with the 800 million-euro median estimate. Kering contrasts with LVMH Moet Hennessy Louis Vuitton SA, whose first-half earnings trailed estimates. LVMH, the world’s largest luxury-goods maker, said last week that Asian demand for fashion and leather goods weakened significantly in the second quarter amid political unrest in Hong Kong, fueling concern that shoppers are tiring of the largest luxury brands.
Kering said today it anticipates an improvement in operating performance in the second half of the year and a return to positive revenue trends. Comparable sales for Gucci fell 2.4 percent in the second quarter, falling short of analysts’ estimates for no growth for the brand. Sales of Saint Laurent rose 29 percent in the period, Kering said, exceeding the 22 percent gain predicted by analysts. Bottega Veneta, Kering’s second-largest luxury brand, also reported revenue growth that exceeded analysts’ estimates.