PARIS: Sales at Gucci rose more slowly than expected in the second quarter, taking the shine off a jump in profit margins at the Italian fashion label which contributes the bulk of revenue and profit at luxury group Kering.
Investors are keeping a close watch on the extent to which it might lose steam after three years of explosive growth following a hit makeover under designer Alessandro Michele.
The brand is at a disadvantage due to a high comparison base, but the slowdown, while expected, comes just as sales growth at rivals including LVMH’s Louis Vuitton and Christian Dior brands leapt ahead of forecasts in the period.
Gucci’s comparable sales expanded by 12.7% in the April to June period, missing expectations for 14% to 15% growth.
A weak performance in the United States, linked partly to a drop in Chinese visitors there, dragged on Gucci’s sales and that of other Kering labels, which include Saint Laurent, the group’s Financial Director Jean-Marc Duplaix said.
“It’s a market that’s becoming more difficult, we’ve seen that for all our brands,” Duplaix told reporters.
The brand is planning more marketing campaigns, including in the United States, in the second half of the year, Kering said.
Executives at the group have said Gucci’s growth still has a long way to run – carried like rivals by booming Chinese demand – and the brand has recently branched out into make-up, homeware and high-end jewellery.
The label is still converting stores to its rococco new look, which has helped boost sales by the square metre in the shops it has already redesigned, and shaken up its product and price mix in recent years.
This has helped drive up margins and operating profitability at Gucci proved a bright spot in the second quarter, reaching 40.6% at the end of June and already exceeding medium-term goals set out a year ago.