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Kering Beat Estimates, Reorganises Management of Luxury Division

François-Henri Pinault | Source: Courtesy
By
  • Bloomberg

PARIS, France — Kering SA reported first-quarter sales that beat analysts estimates as growth in its directly operated stores cushioned a slowdown at handbag maker Gucci, and said it will reorganize its luxury division.

Revenue rose 1.2 percent to 2.4 billion euros ($3.32 billion), Kering said today in a statement after European markets closed. Analysts predicted 2.37 billion euros, according to the median of 19 estimates. Luxury sales advanced 6.3 percent, excluding acquisitions and currency fluctuations, slightly faster than the 6.2 percent median estimate compiled by Bloomberg.

Gucci is introducing more expensive products and upgrading stores as it seeks to win back consumers, who are switching to brands they perceive to be more exclusive. Sales at Kering’s biggest brand, which rose 0.3 percent in the quarter on a comparable basis, should improve from the second half of 2014, analysts at Barclays and HSBC predict. Analysts predicted 0.5 percent first-quarter revenue growth for Gucci.

Kering is “confident” it will improve its operating performance in 2014, Chief Executive Officer Francois-Henri Pinault said in the statement.

Alexis Babeau, managing director of Kering's luxury unit since 2011, will leave the company "to take his career in a new direction," Kering said in a separate statement. From next month, his role will be split into two with Marco Bizzarri overseeing all couture and leather goods brands, excluding Gucci, and former LVMH Moet Hennessy Louis Vuitton SA executive Albert Bensoussan heading watches and jewelry, Kering said.

‘Integrated Group’

“The introduction of this structure is a logical stage in the formation of a more integrated group to further accelerate the development of our brands while respecting the autonomy and individual identity of each of them,” Pinault said in the statement.

Bizzarri will continue to lead handbag maker Bottega Veneta until a replacement is found, while Gucci CEO Patrizio di Marco will continue to report directly to Pinault, Kering said. Pinault will remain chairman of the Saint Laurent brand, which is "at a pivotal moment," Kering also said.

LVMH, the French owner of Gucci competitor Louis Vuitton, this month reported a 9 percent gain in first-quarter fashion and leather-goods revenue, its fastest growth in two years. Burberry Group Plc, the U.K.'s largest luxury-goods maker, also reported comparable store sales growth that beat estimates.

Kering rose 1.4 percent to 153.4 euros at the close of trading today in Paris. The shares have fallen 0.2 percent this year, giving the maker of Balenciaga shoes and Volcom boardshorts a market value of 19.4 billion euros.

By Andrew Roberts

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