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Kering's Gucci Joins Peers in Defying China Fears

Momentum at powerhouse Gucci slowed slightly but still outperformed most other fashion brands. Kering's comparable sales rose a higher-than-expected 24.2 percent.
Source: Gucci
By
  • Reuters

PARIS, France — Luxury goods group Kering joined competitors in defying concerns of waning demand in China, as momentum at its powerhouse Gucci slowed slightly in the fourth quarter but still outperformed most other fashion brands.

Like its peers, Paris-based Kering, which also owns Saint Laurent and Balenciaga, has been under scrutiny over whether demand among Chinese shoppers, who account for over a third of industry sales, can hold up.

The firm's comparable sales rose a higher-than-expected 24.2 percent in the October to December period, when stripping out currency swings and acquisitions, and were up 24.5 percent on a reported basis to €3.8 billion ($4.29 billion.)

"Sales among our Chinese clientele remained very dynamic in the fourth quarter, even with a high comparative base," financial director Jean-Marc Duplaix told journalists on Tuesday, adding that spending by these customers had shifted from overseas to mainland China.

The group's Italian label Gucci held on to its crown as one of the luxury world's fastest-growing brands. Comparable sales growth of 28.1 percent in the fourth quarter marked a slowdown from the previous three months but far exceeded that of rivals, while margins reached a record 39.5 percent in 2018.

Gucci's might — with annual sales of €8.3 billion putting it neck and neck with privately-owned Chanel behind LVMH's Louis Vuitton as the top luxury label by sales — has raised questions about Kering's reliance on the label.

It accounted for over 80 percent of the group's operating income in 2018.

Gucci has also been in the spotlight over a tax investigation in Italy, where Kering faces a potential €1.4 billion bill for allegedly avoiding tax on earnings generated by the Italian label and billed to a Swiss subsidiary.

Kering is disputing the basis of the claim and the amount.

By Sarah White and Pascale Denis; editors: Sudip Kar-Gupta, Kirsten Donovan.

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