Kering's Gucci posted a bigger than expected drop in first-quarter sales on Tuesday, which it blamed on a transition period as Gucci, its flagship brand, works to regain momentum under a new creative and management duo. Gucci, which pulls in nearly 60 percent of Kering's operating profit, saw sales fall nearly 8 percent in the three months to March 31, while analysts had expected a drop of 3-6 percent. "Our priority is to give Gucci new impetus," Kering Finance Director Jean-Marc Duplaix said.
Kering ousted Gucci's chief executive and designer, Patrizio di Marco and Frida Giannini, respectively, in December in an attempt to stem declining sales. The Florence-based design house named Marco Bizzarri as CEO, after he oversaw Bottega Veneta's stellar growth, and promoted in-house designer Alessandro Michele to creative director. Duplaix reiterated Kering's previous prediction that Gucci's performance would only start to improve in the second half of the year, once Michele's collections hit the shelves.
Sales at Gucci's own retail network of 502 stores fell 4 percent in the quarter, including a 10 percent slide in the Asia-Pacific region as its performance in Greater China "deteriorated compared to earlier in the year." However, retail revenue remained stable in North America and rose 6 percent in Western Europe. Kering said it planned to continue pruning Gucci's portfolio and beefing up entry-level products such as small leather goods and luggage, which had not been performing well. The brand would also continue investing in online retail.
Asked about moves by rivals such as Chanel to cut prices in Asia to reduce discrepancies with Europe, Duplaix said the company did not want to react immediately. For certain brands and products there could be some harmonization across regions, excluding value added tax or customs duties, he said.
Kering's No. 2 luxury brand Bottega Veneta also saw a slowdown in the first quarter, with revenue growth of 3.1 percent on a comparable basis. Duplaix blamed poor trading in Hong Kong and Macao, where tourist flows dried up after last year's pro-democracy protests and where Bottega Veneta made 19 percent of its sales.
The report isn't full of bad news only, though, as for the first three months of 2015, sales of Saint Laurent were up 21 percent year-over-year on a comparable basis. Sales for the design house known for its skinny rocker aesthetic were especially strong in North America (up 39 percent), but Western Europe (up 29 percent) and Japan (up 22 percent) showed impressive growth, as well.
Kering's Puma sports brand posted a 13 percent rise in sales to 825 million euros in the first quarter, up 4.5 percent on a comparable basis. Duplaix said he expected Puma's sales growth in the second quarter to be similar to the first.