PARIS (Reuters) -Sales at French luxury group Kering fell 7% in the fourth quarter, dragged lower by a slump in revenue at its biggest brand Gucci reflecting COVID-19 disruptions in China.
Gucci’s revenue fell 14% on a comparable basis to 2.73 billion euros ($2.92 billion) to lag an analysts’ consensus for an 11% fall.
For the group, analysts had forecast a slide in comparable sales of 3%.
Finance chief Jean-Marc Duplaix said Gucci’s 2022 performance “did not meet our expectations”, adding the group was confident it could turn around the brand in 2023.
Gucci parted ways with its star designer Alessandro Michele last November and in January announced the appointment of Sabato De Sarno, a relatively unknown designer at rival Valentino, as its new creative director.
De Sarno will present his debut collection in September, leading some analysts to say it will take time before he can make his mark on the brand.
After stellar growth in 2015-2019, Gucci – which accounts for the bulk of sales and profits at Kering – has lost momentum in recent years, lagging rivals such as Louis Vuitton and Hermes.
Gucci’s 2022 recurring operating income was flat at 3.73 billion euros, while that of fellow Kering brand Yves Saint Laurent jumped 43% to top 1 billion euros.
Duplaix said the beginning of the year had been “very encouraging” in China after travel restrictions were lifted towards the end of 2022, sparking industry hopes for a sharp rebound in sales.
The luxury sector has been hit by lockdowns in China and the country’s exit from a zero-COVID policy, which spurred a surge of infections in the world’s second-largest economy.
Investors have so far shrugged off a disappointing performance from the industry in China, focusing instead on rising expectations for a strong rebound.
But the situation has been more complicated for Kering, since Gucci, its main profit driver, relies more heavily on China than rivals.
Gucci held back on marketing investments during the pandemic, while larger rival LVMH’s two biggest labels, Louis Vuitton and Dior, pushed ahead. Analysts say that helped them gain ground.
Duplaix stressed that Kering’s efforts at Gucci were aimed at the long term, citing an emphasis on the quality of its retail network and reevaluating its product offering.
“We are confident this will all bear fruit,” he said.
Gucci executives are focusing on timeless fashions and higher-priced products as well as a ramp-up in marketing and a higher number of collections.
($1 = 0.9339 euros)
(Reporting by Mimosa Spencer; editing by Silvia Aloisi and Jason Neely)
