© Reuters. FILE PHOTO: The logo of French luxury group Kering is seen at Kering headquarters in Paris, France, February 13, 2023. REUTERS/Sarah Meyssonnier/File Photo
By Mimosa Spencer
PARIS (Reuters) -Kering posted a 4% decline in fourth quarter sales, hit by slowing demand for fashion as it seeks to turn around its top brand Gucci, and cautioned that investments in its labels could affect margins in 2024.
Sales at the French group, which also owns fashion labels Bottega Veneta and Balenciaga and jeweller Boucheron, fell to 4.97 billion euros ($5.36 billion) in the final three months of the year, despite improvement in the United States and Europe. That was broadly in line with expectations for 4.94 billion euros, according to consensus estimates cited by RBC.
After a post-pandemic splurge that fuelled stellar sales growth for high end fashion companies over two years, consumers have been reining back purchases, particularly younger, less wealthy clientele that are more vulnerable to rising inflation.
“The end of the year confirmed the trends of the rest of the year with an improvement for us in the United States and slightly in Europe,” Kering (EPA:) chief financial officer Armelle Poulou told reporters.
Poulou highlighted the performance of the group’s Italian luxury label Bottega Veneta, which grew sales by 20 percent in the United States during the quarter.
Kering’s efforts to revive sales at its star label Gucci, which has lagged rivals over the past two years, have been complicated by slowing demand for fashion and accessories, especially in the United States and Europe.
Barclays’ analysts project industry-wide growth from high end luxury companies of 5% this year, down from 9% last year and double digit growth the previous two years.
Gucci’s performance improved over the fourth quarter, down 4% year-on-year, compared with a 7% decline in the third quarter. The label’s recurring operating margin stood at 33.1% for the full year, lower than its level of 35.3% in the first half.
“Gucci is not performing worse than expected which is a relief,” said Piral Dadhania, analyst with RBC, noting that the focus would now turn to Gucci’s margin outlook.
($1 = 0.9276 euros)
