PARIS (Reuters) – Kering’s Gucci posted a bigger than expected drop in first-quarter sales on Tuesday, which it blamed on a transition period as its flagship brand works to regain momentum under a new creative and management duo.
Gucci, which accounts for nearly 60 percent of Kering’s operating profit, saw comparable 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 sacked Gucci’s chief executive and designer in December to try to stem declining sales. It named Marco Bizzarri as CEO, after he oversaw Bottega Veneta’s stellar growth, and promoted in-house designer Alessandro Michele as creative head.
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 harmonisation 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.
Kering’s Puma sports brand posted a 13 percent rise in sales to 825 million euros (594 million pounds) 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.
Duplaix added that the sale process for Kering’s Sergio Rossi shoe brand was “ongoing” and expected to clinch a deal before the end of the year.