Kering SA announces Gucci’s slowest sales growth in four years

Kering SA announced that its Gucci luxury brand achieved the slowest quarterly sales growth in four years as a result of decreasing demand on the European and Chinese markets.

Kering SA made an official statement today, announcing that the fourth-quarter comparable sales of the Gucci brand gained 0.2%, trailing analysts estimates of 0.8% growth. The shares of Kering decreased more than 3%, cutting the companys market capitalization by nearly 700 million euros.

According to data compiled by Bloomberg, the recurring operating income of Kering decreased from 1.79 billion euros in 2012 to 1.75 billion euros, trailing analysts estimates that amounted to 1.77 billion euros. The companys total revenue increased by 0.1% and reached 9.75 billion euros. Kering SAs net income dropped from 1.05 billion euro to 49.6 million euro.

As reported by Bloomberg, the revenue growth of the Gucci luxury brand has been put under pressure for about a year due to the fact that customers, particularly the Chinese ones, preferred other labels they believed to be more attractive. This forced the company to rely more on smaller brands such as Bottega Veneta and Yves Saint Laurent, which had a strong fourth-quarter performance.

One of the analysts working for Barclays – Helen Norris – said in a note to customers, which was cited by Bloomberg: “Gucci is the key issue for the stock currently, given disruption from the repositioning in China.”

The company raised the prices of its Gucci brand, while limiting the distribution in an attempt to make its biggest brand more exclusive attractive to consumers. The fourth-quarter comparable sales of Gucci were the weakest since the third quarter of 2009, when they decreased by 7%.

The Chief Financial Officer of Kering SA Jean-Marc Duplaix revealed on a call with reporters that the luxury brand of the company was damaged by the decreasing number of tourists in Europe.

The Chief Executive Officer of the company – Mr. Francois-Henri Pinault explained at a presentation in Paris, that Kering is becoming more focused on choosing the right strategy for Gucci and making it work in China. He added that such a strategy includes slowing the companys expansion there. Mr. Pinault also revealed that there arent any acquisitions planned in the fast-growing so-called accessible luxury segment.

Kering SA is fell by 3.13% in Paris by 13:31 GMT to EUR 150.15 per share, cutting its market value to 19.1 billion euros. The stock has fallen 2% so far this year.