Gucci propels Kering in Q3, YSL and Balenciaga also strong

Surging demand for Gucci’s accessories and colorful designs helped French parent Kering beat sales forecasts in the third quarter, as some of the luxury industry’s biggest companies ride a recovery in demand from Chinese consumers.
Kering, which also houses labels such as Yves Saint Laurent, Balenciaga and Stella McCartney, said revenue rose 28.4 percent in the third quarter on a like-for-like basis, which removes the effect of currency swings and mergers or acquisitions.

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Analysts polled by Inquiry Financial for Reuters had projected comparable sales growth of 20 percent.
Italy’s Gucci, Kering’s biggest revenue and profit motor, also trumped forecasts as enthusiasm for its flamboyant, sequin-filled makeover under designer Alessandro Michele over the past two years shows little sign of dying down.
Like-for-like sales were up 49.4 percent in the third quarter, accelerating from growth of 39.3 percent three months earlier.

A hit with younger Millennial shoppers, which account for more than half Gucci’s clients, the brand was helped by thriving online sales, which expanded more than 100 percent in the third quarter, Kering’s finance director said.
“There are a lot of levers for Gucci to keep growing,” CFO Jean-Marc Duplaix told journalists by telephone.

The company also said that Yves Saint Laurent sales were up in strong double-digits while Balenciaga is progressing well both on the retail and wholesale front. But Bottega Veneta is still challenged with its sales continuing to fall, although its comps sales fall is shrinking.

Sales at many luxury goods companies are picking up after the industry was hit by an economic slowdown in China and militant attacks in Europe in recent years which hurt tourist spending.

Kering’s larger Paris-based rival LVMH, owner of Louis Vuitton and Hennessy cognac, also beat third quarter sales expectations.

Yet firms are grappling with a stronger euro, which risks putting off some tourists shopping in the bloc, and the Chinese revival is already a year-old, making earnings comparisons tougher and spelling headwinds further down the lines.

Puma, the German sportwear company also owned by Kering and which analysts have said may be ripe for a sale - cautioned earlier on Tuesday that gross margins could be weaker in the fourth quarter due to discounting.
Kering’s revenue reached 3.9 billion euros ($4.59 billion) in the third quarter, up 23.3 percent on a non-organic basis.

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