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Kering Earnings Beat Estimates as Gucci Label Returns to Growth

Kering SA reported first-half earnings that beat analysts’ estimates as sales at the Gucci luxury label grew for the first time in almost two years.
Gucci menswear spring/summer 2016 | Source: Indigital
By
  • Bloomberg

PARIS, France — Kering SA reported first-half earnings that beat analysts' estimates as sales at the Gucci luxury label grew for the first time in almost two years.

Recurring operating income fell 5.4 percent to 773 million euros ($859 million), the Paris-based company said in a statement after European markets closed Monday. Analysts predicted 758 million euros, according to the median of 19 estimates compiled by Bloomberg.

Comparable sales at Gucci increased 4.6 percent in the second quarter, confounding analysts’ predictions for a 3.2 percent decline. That represents a rebound from a 7.9 percent drop in the previous three months. Kering flagged in February that 2015 would be a year of transition for its biggest brand as it overhauls management, drops distributors and introduces new products to help restore growth at the unit.

“We are particularly satisfied with the progress at Gucci,” Chief Executive Officer Francois-Henri Pinault said. “As we enter the second half of the year, I am fully confident in the group’s ability to combine strict management discipline with organic growth at each of our brands.”

Gucci’s growth was supported by demand from Chinese tourists in Japan and Western Europe, and by sales of discounted merchandise in China, Chief Financial Officer Jean-Marc Duplaix said on a call with reporters. Gucci offered discounts of as much as 50 percent in China to clear inventory designed by its former creative director, Bloomberg News reported in May.

Kering is reviving Gucci as demand for luxury goods slows in parts of Asia, where the French company got more than 40 percent of sales last year. U.K. trenchcoat maker Burberry Group Plc said last week it may try to lower its rent bill in Hong Kong to offset a worsening slump there that drove sales growth to a two-year low.

Kering’s revenue reached 5.5 billion euros in the first half, up 17 percent from a year earlier, or 3.5 percent on a comparable basis, the company said.

By Andrew Roberts; editors: Matthew Boyle, Paul Jarvis.

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