French fashion company Kering SA gave a cautious assessment of rebounding luxury sales in China following a “deep impact” for flagship brand Gucci in the first quarter.
Sales in China this month turned positive for Kering, whose other brands include Saint Laurent and Balenciaga, chief financial officer Jean-Marc Duplaix told reporters on Tuesday, citing the repatriation of tourist spending, as well as pent-up demand following the coronavirus lockdown as factors supporting the recovery.
“We have to be very cautious, as we only have a few weeks to analyze since stores were able to reopen,” Duplaix said.
Photo: Reuters
The trend of catching up on purchases thwarted by quarantine measures would likely be for the short term, he said.
First-quarter sales fell 16 percent on an organic basis globally, compared with previous guidance for a drop of about 15 percent, Kering said in a statement.
Gucci’s sales fell 23 percent.
With stores still shuttered in most of the world, it is “extremely difficult” to make predictions about when business would improve, Duplaix said.
The company said that it does not expect to see sales recover in the US or Europe before at least June or July.
The results suggest “a hint of a brand-specific slowdown at Gucci,” given that all other labels within the Kering stable did better, Sanford C. Bernstein analyst Luca Solca said in a note.
Chinese clients have made up more than a third of luxury sales in recent years, and with lockdowns still in place in the rest of the world the industry is counting on them more than ever as restrictions ease.
LVMH, the owner of Louis Vuitton and Dior, last week reported that revenue slid 15 percent in the first three months of this year to 10.6 billion euros (US$11.51 billion).
The company flagged a rapid acceleration in China this month as shoppers clamored to make purchases delayed by lockdowns.
With the Chinese economy last quarter shrinking for the first time since at least 1992, many consumers are expected to rein in spending. That has cast doubt on whether the current bout of what has been called “revenge spending” signals a durable rebound.
LVMH proposed to cut its dividend for last year by 30 percent as well as reducing pay for CEO Bernard Arnault and other members of the executive board.
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