Gucci sales growth missed estimates in the first quarter as lockdowns in China weighed on the performance of the biggest Kering SA brand.

Sales at Gucci, which generated more than half of Kering’s revenue in the period, rose about 13 percent on a comparable basis, the Paris-based company said Thursday. Analysts had predicted a gain of almost 19 percent.

Kering’s figures follow strong results from LVMH SE and Hermes International last week. The luxury giants benefited from rebounding demand in Europe and North America, even as virus-related lockdowns in China and the war in Ukraine worsened inflationary pressures and supply-chain snags. Last year, the Asia-Pacific region was Kering’s largest market, with 38 percent of sales.

“Sales momentum remained very strong with local customers in North America and Western Europe in particular,” Kering said of Gucci’s results. “Performance in Asia-Pacific was more mixed due to new Covid-related lockdown measures at the end of the period, notably in Mainland China.”

On a call, Chief Financial Officer Jean-Marc Duplaix said the fundamentals of Chinese demand were intact but that the virus-related restrictions, notably in Shanghai, were still “extremely difficult.” He also said that the current lockdown situation in the country was more severe than last summer. The group’s online operations are also disrupted since some warehouses are closed, added Claire Roblet, who oversees investor relations.

Total revenue at Kering climbed about 21 percent in the quarter on a comparable basis, just ahead of estimates, as other top brands performed well. Yves Saint Laurent showed the biggest jump, with sales up about 37 percent, blowing past predictions for 24 percent growth. Bottega Veneta also surpassed analyst estimates.

Headwinds

Kering faces “substantial headwinds, from the war in Ukraine to the lockdowns in China,” Harry Barnick, an analyst at Third Bridge said. “Whilst luxury consumer spend in Europe appears resilient for now, traffic has already collapsed in the crucial Chinese market.”

Shares of Kering have slumped 22 percent this year, compared with a 10 percent decline in LVMH’s stock.

Of China, Chief Executive Officer Francois-Henri Pinault said Thursday that Kering is “boosting its organization to fully capture the vitality of the market.” Gucci earlier this month named Laurent Cathala president of its Greater China fashion business.

Duplaix explained on the call with reporters that it’s important for Kering’s brands, notably Gucci, to have more powerful regional units, with more local staff in the teams since each market has its own peculiarities.

By Angelina Rascouet

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