Gucci, the renowned luxury fashion brand owned by Kering, experienced a significant decline in sales during the fourth quarter of 2020. This decline can be attributed to the ongoing impact of the COVID-19 pandemic, which has greatly affected the luxury shopping industry and hindered tourist spending. However, while Gucci struggled, other brands under the Kering group, namely Saint Laurent and Bottega Veneta, performed exceptionally well.

During the crucial holiday season, Kering reported a revenue of €4 billion, which represented an 8.2% drop compared to the previous year. This decline was equivalent to a 5% decrease on a comparable basis. Analysts had anticipated a 1% increase, making these numbers disappointing.

Gucci’s sales decline was more severe than the overall company’s decline, which is particularly concerning considering Gucci’s significant contribution to Kering’s total revenue. The brand experienced a 10.3% decline in Q4 revenues, far worse than the predicted 4% decrease. Despite these challenging numbers, Kering remains optimistic and has highlighted its growth initiatives in preparation for Gucci’s upcoming 100th anniversary.

François-Henri Pinault, Chairman and CEO of Kering, expressed his optimism regarding the company’s overall performance in 2020. He stated, “In a year of disruption, Kering demonstrated remarkable resilience and agility. We achieved a solid top-line recovery in the second half, we protected our margins while continuing to invest in our Houses and growth platforms, our cash flow generation remained elevated, and we further strengthened the group’s financial structure.” Pinault believes that Kering’s strategy and business model are well-aligned with the current and future trends of the luxury industry, positioning the company for success as the market rebounds.

For the full year, Kering reported a consolidated revenue of €13.1 billion, representing a decline of 17.5% on a reported basis and 16.4% on a comparable basis. The retail network experienced a 15.9% decline in sales on a comparable basis, but saw a robust recovery in the second half, primarily driven by North America and Asia-Pacific. Wholesale revenue dropped by 17.4%, but online sales surged by 67.5%, accounting for 13% of the total sales generated by the retail network.

Gucci’s comparable revenue for the year fell by 21.5% to €7.44 billion. Saint Laurent saw a decline of 13.8% at €1.74 billion, while Bottega Veneta managed to achieve a 4.8% increase, reaching €1.21 billion. The ‘other’ brands within the Kering portfolio experienced a 14.6% decline in revenue, totaling €2.28 billion.

Despite the challenging numbers, there were some positive aspects to highlight. Online sales and the revenue increase for Bottega Veneta were particularly encouraging. Digging deeper into the results, it becomes evident that Gucci performed well in Mainland China, with online sales showing a remarkable 70% rise. The brand’s recurring operating margin remained strong at 35.1% for the year and 38.6% for the second half.

While Saint Laurent’s revenue for the year also declined, it recorded a marginal increase of 0.5% on a comparable basis in Q4. The brand experienced positive sales momentum in Asia-Pacific, North America, and Japan.

Bottega Veneta had an impressive year, with its revenue increasing despite a challenging first half. The brand achieved an 18% increase in comparable sales during the second half, excelling in Asia-Pacific and online platforms. In Q4 specifically, revenue rose by 15.7%, even when faced with tough year-over-year comparisons.

Other brands within the Kering portfolio, such as Balenciaga and Alexander McQueen, delivered satisfactory revenue growth compared to the previous year. However, the ‘other’ division, which includes luxury jewelry brands, faced struggles in Western Europe while experiencing strong growth in Asia. Overall, the ‘other’ unit saw a 1.7% increase on a comparable basis in Q4.

Despite the challenges posed by the pandemic, Kering remains confident in its ability to rebound and capitalize on future opportunities within the luxury fashion industry. The company’s focus on resilience, investment, and strategic positioning positions it well for future success.

Links:
1. Kering Brands Bounce Back in China, Orders Surge – Reuters
2. Kering Sees U.S. Sales Surge as Labels Like Gucci Weather Trade War – Business of Fashion