Gucci’s Appeal Holds Up in Pandemic as Kering Beats Estimates

(Bloomberg) -- Kering SA’s revenue beat estimates as its Gucci and Bottega Veneta brands lured consumers keen to splurge on luxury treats during the pandemic.

Organic revenue fell only 1.2% in the third quarter, compared with analysts’ projection for a 9.1% drop. Results were helped by a better-than-expected performance at cash cow Gucci, as well as a jump in sales at Bottega Veneta. Overall revenue came in at 3.72 billion euros ($4.4 billion).

Expectations for the industry were heightened after LVMH, the owner of Louis Vuitton and Christian Dior, reported a surprise rebound in sales of fashion and leather goods last week. Still, it’s been the toughest year for luxury in decades, with many stores shut during the first half as countries imposed strict lockdowns and international travel ground to a halt.

Kering’s reliance on Gucci -- which represented 60% of total revenue last year-- has been a major driver of the conglomerate’s success, but the uncertain economic times could play against it. Citigroup analysts led by Thomas Chauvet wrote that they welcomed management’s efforts to “tone down” the often flamboyant aesthetic at the brand to attract older consumers and not just millennials. Organic revenue at Gucci fell 8.9% in the quarter, less than the 10% drop analysts expected.

Gucci probably suffered more than some of its rivals in Europe because of its exposure to tourism, Chief Financial Officer Jean-Marc Duplaix said during a call with reporters on Thursday. Gucci has had less of a local customer base historically, he said.

While the current environment is “uncertain,” the company remains “confident” of its overall strategy, the CFO said. Kering continues to try to make Gucci more exclusive by reducing its wholesale presence. The goal is for wholesale to represent less than 10% of the brand’s revenue, which should happen sometime next year, Duplaix said.

Revenue at Bottega Veneta -- known for its signature woven-leather shoes and handbags -- climbed 21%, more than the expected gain of 4.3%. Sales at Yves Saint Laurent also exceeded estimates.

While Bottega Veneta’s contribution to the company remains limited, “we welcome the brand’s signs of commercial success evidenced over the past year under the creative leadership of the new designer Daniel Lee,” Citigroup wrote ahead of the results.

©2020 Bloomberg L.P.