Kering Shares Drop as Gucci Growth Cools, Bottega Veneta Slides

(Bloomberg) -- Kering shares fell the most in more than six months as growth at the French company’s flagship Gucci brand cooled from last year’s relentless pace and sales slumped at leather goods maker Bottega Veneta.

The shares dropped as much as 7.6 percent in Paris trading, the steepest decline since Oct. 10, 2018, after the company reported revenue that narrowly beat analysts’ estimates late on Wednesday.

Gucci’s growth has been slowing gradually in the third year of a blockbuster turnaround under CEO Marco Bizzarri and designer Alessandro Michele, whose decadent products like crystal-coated sunglasses and serpent-painted handbags ushered in an era of new maximalism in fashion.

The bar was high for Kering’s sales as investors have gotten used to big beats in Gucci’s top line. Also, rival LVMH reported higher-than-expected sales last week, lifting shares across the luxury sector.

“We’re in a phase of normalization,” Chief Financial Officer Jean-Marc Duplaix said on a call with reporters. “I’m very comfortable with Gucci’s trajectory.”

Sales rose 20 percent on a comparable basis for Gucci, which now makes up about three-quarters of the French group’s profit, according to a statement. Overall sales of 3.79 billion euros ($4.28 billion) beat estimates slightly, with the Yves Saint Laurent unit and the division selling products like Balenciaga sneakers growing faster than expected.

“Given the lack of beat, the market is likely to focus on a few negatives” including Bottega Veneta’s worse-than-expected performance, Thomas Chauvet, an analyst at Citi Research, wrote in a note to clients.

The Italian handbag maker’s sales fell sharply during the quarter even as a new designer hired from LVMH, Daniel Lee, staged a well-received first runway show during Milan Fashion Week in February. Kering is forecasting “very gradual” improvement after his collections arrive in stores mid-year.

©2019 Bloomberg L.P.