Kering Shares Tumble as Torrid Gucci Demand Isn't Torrid Enough

(Bloomberg) -- Kering SA shares fell as the French luxury company’s Gucci brand became a victim of its own success.

The wildly popular fashion marque’s growth came in slightly below expectations in the second quarter, at 40 percent. Though still a rate that most rivals can only envy, that was less than the previous quarter’s 49 percent pace, and investors don’t like the emerging trend as year-over-year comparisons get tougher. Kering shares fell as much as 6.2 percent, the most in more than two years, in early Paris trading Friday.

The luxury conglomerate said comparable sales overall rose 32 percent in the latest three months, to 3.3 billion euros ($4.3 billion). That was roughly in line with the estimate of analysts surveyed by Bloomberg News. Like French fashion rival LVMH, it’s benefiting from seemingly insatiable demand in China, while Gucci also raced ahead in North America.

“We have not at this stage seen a slowdown in demand from the Chinese client,” Kering Chief Financial Officer Jean-Marc Duplaix said on a call.

Kering knows the knockout growth at Gucci, fueled by creative director Alessandro Michele’s designs, can’t go on forever. So it has been disposing of nonluxury assets like Puma SE, which it spun off in May, to focus on higher-end fashion in the hope of pushing profit margins into the cash-cow territory of LVMH’s Louis Vuitton and Hermes International.

The weak link at Kering remains Bottega Veneta, where comparable sales fell 2.3 percent in the second quarter. Revenue has stagnated since 2015, and the company replaced creative director Tomas Maier earlier this summer.

In addition to the Puma spinoff, Kering has divested sportswear label Volcom as well as stakes in the contemporary designers Stella McCartney and Christopher Kane.

©2018 Bloomberg L.P.