Gucci, the star brand of the Kering group, suffered a 2.4 percent sales decline on a currency-neutral basis in the second quarter as compared to the same period a year ago. The management again used two arguments - the upgrading of its collections and changing consumption patterns in China - to explain the drop.
For the first half of the year, Gucci's sales were off by 1.1 percent on a comparable basis. In terms of euros, they declined by 4.5 percent to €1,676.3 million. The entire luxury segment of Kering however, posted a sales increase of 4.9 percent in reported terms to €3,230.4 million, with gains of 12.9 percent for Bottega Veneta, 25.6 percent for Yves Saint Laurent and 17.5 percent for other brands, including Sergio Rossi. Even better results were achieved by Bottega Veneta and Saint Laurent in the second quarter - in euros as well as in local currencies.
Revenues generated by Sergio Rossi were weighed down in the first half by ongoing measures put in place to streamline and reduce the number of its third-party distributors as well as by a decrease in tourist flows, said Kering.
On a comparable basis, Kering's luxury segment raised its turnover by 5.7 percent, with solid performance at directly operated stores (DOS) across all geographies. Sales through DOS, which numbered 1,169 units at the end of the period, rose by 9.9 percent on a comparable basis during the first half, representing 68.9 percent of all the revenues from luxury goods. Wholesale revenues declined by 3.2 percent, but were up by 2.0 percent in the second quarter.
Shoes represented 13.1 percent of the revenues from the luxury goods division, and emerging markets nearly 40 percent of the total, rising by 6.7 percent. Sales grew by 6.8 percent in Greater China, with less robust performance in Hong Kong. Strong momentum in the Middle East and Latin America contrasted with a contraction in Eastern Europe. The division's sales were stable in Western Europe but grew by 7.7 percent in North America, with an 11.5 percent increase in the second quarter.
The division generated an operating profit of €798.7 million over the six months, 1.2 percent higher than in the year-ago period and equal to 24.7 percent of sales. Gucci continued to contribute the lion's share, but its profits fell by 5.1 percent to €527.6 million, in contrast to increases of 11.3 percent for Bottega Veneta, 50.4 percent for Saint Laurent and 12.2 percent for the other luxury brands.
The management cited a number of negative trends such as weaker consumer spending in Asia-Pacific, economic and political factors in Europe and a generally more volatile consumer behavior toward luxury goods, notably with significant sensitivity to regulatory and fiscal changes.
Across the Kering group, revenues from continuing operations went up by only 1.5 percent to €4,747 million in the first half due to a drop of 5.6 percent in its Sport & Lifestyle segment, covering Puma, Volcom and other brands. Excluding extraordinary items, the group's operating income (Ebit) fell by 3.9 percent to €810 million, which amounted to an operating margin of 17.1 percent, but it would have risen by 6.2 percent if foreign exchange rates had remained the same. Net earnings fell by 4.7 percent to €555 million.
Kering's management has indicated that it plans no new acquisitions in the sports & lifestyle segment until Puma returns to its former growth and profit trends. On the other hand, Kering continued to invest in the luxury goods sector a few days ago with the acquisition of a high-end Swiss watchmaker, Ulysse Nardin.