French luxury giant Kering reveals stronger-than-anticipated fourth-quarter sales, though the group still experiences a year-on-year decline driven by sluggish demand for its leading brand, Gucci. Investors await signs of recovery in the luxury sector, impacted by reduced consumer spending, particularly in China.
French luxury goods firm Kering announced better-than-expected fourth-quarter sales on Tuesday, despite a year-on-year decline attributed to lagging demand for its flagship Gucci label. The luxury fashion group reported a 12% decrease in fourth-quarter revenues to 4.39 billion euros ($4.52 billion), narrowly exceeding the 4.29 billion euros forecast by LSEG analysts.
Kering becomes the latest European luxury group to release earnings in recent weeks, as investors eagerly seek indicators of recovery within a sector grappling with a slowdown in consumer spending, particularly in the crucial Chinese market. The high-end fashion conglomerate, which also houses brands like Bottega Veneta, Balenciaga, and Alexander McQueen, witnessed a 12% decline in fourth-quarter revenues to 4.39 billion euros ($4.52 billion), just slightly ahead of the 4.29 billion euros projected by LSEG analysts. Sales at Gucci, responsible for nearly half of the group's total revenue, plummeted 24% annually over the three-month period to 1.92 billion euros on a comparable basis, extending losses for the group's once highly celebrated luxury brand. Operating income for the year reached 2.55 billion euros, aligning with the group's revised forecast issued in October but representing nearly half the 4.75 billion result achieved the previous year. 'In a challenging year, we accelerated the transformation of several of our Houses and resolutely worked to strengthen the health and desirability of our brands for the long term,' stated chairman and CEO François-Henri Pinault in a press release. 'Our efforts must remain persistent, and we are confident that we have guided Kering to a point of stabilization, from which we will gradually resume our growth trajectory.' The French fashion house highlighted a slight uptick in Asia Pacific and North America sales across its Gucci, Yves Saint Laurent, and Bottega Veneta brands, but refrained from providing specifics on individual market performances. Kering joins other European luxury groups in reporting earnings recently, as investors seek signs of revival within a sector hampered by reduced consumer spending, particularly in the vital Chinese market. However, sustained weakness in LVMH's fashion and leather goods and wines and spirits segments points towards further divergence within the sector. Kering, heavily reliant on the Chinese consumer, has been enduring a particularly harsh downturn, as its star label Gucci has fallen out of favor. On Thursday, the fashion group announced the departure of Gucci design chief Sabato De Sarno, marking the first significant change since Gucci CEO Stefano Cantino assumed leadership last year to revitalize the brand. Minimalist designer De Sarno held his position for less than two years, succeeding Alessandro Michele, whose maximalist designs had defined the brand in previous years.Simone Ragazzi, senior equity analyst at Algebris Investments, stated on Monday that Kering would be hoping to signal a brand reset with the new design appointment, but added that investors were likely to maintain a cautious stance as legacy issues persist. 'This is a hope the market has been betting on for quite some time. It is always a little bit of a question mark,' he conveyed to CNBC during a video call. 'The brand has become accustomed to the highs and lows in the past, because it is one of the most fashion-driven luxury groups,' he continued. 'The hope is that the new designer can reinvigorate the brand.
LU XURY GOODS KERİNG GUCCI SALES FOURTH QUARTER EUROPEAN LUXURY SECTOR CONSUMER SPENDING CHINA
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