Saint Laurent Revenues Still Growing, Gucci Shows Signs of Growth

Kering, the French conglomerate that owns Gucci, Saint Laurent, Balenciaga and Bottega Veneta, reported third-quarter revenue growth that beat analysts’ estimates. Three and a half years after Hedi Slimane took the helm at Saint Laurent, sales are still booming. The house posted a sales increase of 37 percent on a reported basis and 27 percent on a comparable basis. Gucci, which has struggled significantly to achieve any sizeable amount of growth over the past several years, is also starting to build momentum under creative director Alessandro Michele. Sales are up 9 percent on a reported basis, for the Florence-based house, while there was no growth reported on a comparable basis.

Kering’s sales as a whole climbed 3.1 percent on a comparable basis; analysts predicted growth of 2.8 percent. The conglomerate “breaks a series of disappointing updates by luxury-goods companies,” said Exane BNP Paribas analyst Luca Solca. In particular, Gucci’s efforts to overhaul management and merchandise “should give cause for reasonable optimism” for growth in the fourth quarter. Kering echoed such sentiments, noting the consumers’ enthusiastic response to Gucci creative director Alessandro Michele’s debut collection, which only arrived in stores a month ago, citing double-digit growth of his new handbag designs and improving wholesale trends. Kering has said 2015 is a year of transition for the brand.

Other luxury firms did not fare so well. Per Bloomberg, London-based Burberry reported last week that its profit will probably decline for a second straight year, while LVMH Moët Hennessy Louis Vuitton’s sales also missed estimates. The latter, which is the world’s biggest luxury group with a roster of 70 brands including Givenchy, Marc Jacobs, Loewe, and Celine, reported last week that comparable sales growth at its key fashion and leather goods division had slowed more than analysts expected to 3% in the third quarter, down from 10% in the previous three months.

The Paris-based group blamed decreased spending rates by Chinese for the decline. LVMH has became the first major luxury goods provider to say the stock market collapse in China over the summer has affected sales, particularly at its flagship Louis Vuitton brand. [Note: LVMH reported a 16% increase in total revenue to $9.45 billion for the third quarter alone, noting that the weak euro and strong sales in its wines and spirits division – home to brands including Moët and Hennessy – more than made up for slower growth in the fashion business.]

China’s anti-extravagance push and the yuan’s devaluation have hurt demand for luxury there. U.S. growth, meanwhile, has slowed as financial market turmoil and the strong dollar crimp spending among residents and tourists. Kering, in particular noted that the quarter was characterized by sharp contrasts across regions.