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The luxury rebound boom continues. Kering on Tuesday reported a double-digit increase in sales across brands, including Gucci, which stumbled in the previous quarter.
Gucci sales were up 24.6 per cent for the first quarter of 2021 over the year prior. Overall, Kering’s sales were up 26 per cent on a comparable basis for the same period. Compared with the first quarter of 2019, Kering sales were up 5.5 per cent at constant exchange rates. Kering’s quarterly update is “solid”, according to Bernstein analyst Luca Solca.
“In the first quarter, Kering delivered a strong topline performance, bouncing back above pre-pandemic levels,” Kering chairman and chief executive François-Henri Pinault stated. “Growth was consistent across all our houses, and we are particularly pleased with Gucci’s momentum as the brand kicks off its centennial celebration. While 2021 should still face some impact from the health crisis, the strategy, positioning and creativity of our Houses will enable each one of them to thrive in today’s environment.”
All eyes were on Kering following LVMH’s earnings result last week, which beat expectations. LVMH reported a 52 per cent increase in sales for its fashion and leather goods division, as well as a 30 per cent increase overall, for its first quarter of 2021 over the year prior. The results were not expected to cause a spike in Kering shares, which already benefited from a jump following LVMH’s earnings, wrote Solca.
Pinault revealed an action plan for Gucci in February after revenue fell 10.3 per cent in the fourth quarter on a comparable basis, following the 8.3 per cent decline in the third quarter. It included a focus on handbag sales and more events. “The strategy we have for 2021 is paying off,” Kering chief financial officer Jean-Marc Duplaix told analysts during the earnings calls on Tuesday. He noted that the growth is well-balanced across ready-to-wear, leather goods and shoes. Still, Gucci’s growth is on par with, and in some cases behind, other Kering brands. Saint Laurent sales were up 23.4 per cent, Bottega Veneta’s were up 24.6 per cent and “other” houses, including Balenciaga and Alexander McQueen, were up 33.1 per cent.
“The smaller brands have all done better than Gucci in beating sell-side consensus — with Bottega Veneta and the “other” houses leading the charge,” Solca wrote.
China and the US were the key growth drivers. Kering saw sales in Asia-Pacific, not including Japan, increase by 83 per cent, with Gucci sales in China up by triple-digits, driven by marketing activations, a capsule collection for Chinese New Year and Gucci’s December debut on Tmall. Overall sales for Kering in North America increased 46 per cent, while Gucci saw a 51 per cent increase of its retail sales in the region. In China and the US, Gucci sales were driven by a rush of new clients, while Europe saw “a big push from existing clients”, according to Duplaix. Many Gucci stores in Europe remain closed, though Duplaix pointed to online sales growth in Germany, Italy and France. Online sales at Kering stood for 14 per cent of the retail sales globally in the quarter, up from 9 per cent in the same period last year.
Last week, Gucci presented its Autumn/Winter 2021 Aria collection, featuring a surprise collaboration with Balenciaga. “We believe that the recently launched Gucci and Balenciaga collaboration has promise: this is exactly the kind of thing Gucci should do — in our opinion — to reignite young Chinese consumer interest for the brand,” Solca writes. A focus on high-end customers has been reinforced at the brand, and average selling price has increased along with the number of products. Duplaix noted that Gucci’s Ouverture collection, which recently hit stores, has contributed to the increase in selling price. He anticipates the Aria collection will do the same.
Moving forward, the company plans to continue the combination of marketing efforts, in-store activations and campaigns, which were started at the beginning of the year, says Duplaix. Reflecting on 2020, he says there was a lack of product, newness and an underinvestment in marketing activity.
In regards to any potential M&A activity, Duplaix said that the company wouldn’t comment on “pure speculations”. It was reported in March that Kering approached Richemont with a merger offer, which Richemont rejected, though it was unconfirmed by both companies.
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