Kering, the renowned French luxury conglomerate that owns some of the world’s most prestigious fashion brands like Gucci, Saint Laurent, Bottega Veneta, and Balenciaga, has recently announced its projected decline in sales for the first quarter of 2020 due to the ongoing coronavirus pandemic. The company anticipates a 15% decrease in comparable sales during this period, resulting in a reported sales decline of around 13% to 14%. This comes as a stark contrast to the successful first quarter of fiscal 2019, during which Kering experienced a remarkable 21.9% increase in reported sales and a 17.5% increase in comparable sales.
The impact of the health crisis is being felt across Kering’s markets. Although there are positive signs of recovery in Mainland China where store traffic and sales are rebounding, other Asia Pacific markets continue to be heavily affected. In addition, the situation has progressively worsened in Western Europe and North America in recent weeks. Kering expects the repercussions of the pandemic to persist throughout the entire first quarter and foresees a significant decline in revenue for the second quarter, primarily due to the impact on local customers and tourism. The company also predicts a decline in its recurring operating margin for the first half of 2020.
To address these challenges, Kering has initiated an initial action plan to adapt its cost base and manage its working capital requirements. Furthermore, additional measures are being considered to mitigate the impact on its recurring operating margin while safeguarding the market positions and future growth potential of its esteemed brands in the short and medium term. However, due to the dynamic nature of the situation and the lack of visibility, accurately quantifying the exact effects of the coronavirus on these figures at present is challenging.
In the fiscal year 2019, Kering reported impressive annual revenues of 15.88 billion euros, marking a notable increase of over 16%. The company also achieved a record operating margin of 30.1% and a net income of 2.3 billion euros. With the coronavirus continuing to impede the global economy, Kering is preparing itself for potential further measures to navigate the complexities posed by this ongoing pandemic.