April 17, 2019 / 3:57 PM / 4 months ago

Kering beats forecasts even as Gucci growth cools

PARIS (Reuters) - Strong demand for Gucci’s flamboyant designs and handbags helped parent Kering beat first-quarter revenue forecasts on Wednesday, even as the pace of growth at the Italian fashion label cools from the explosive levels of the last two years.

FILE PHOTO: A Gucci sign is seen outside a shop in Paris, France, December 18, 2017. REUTERS/Charles Platiau

Kering, which also owns Saint Laurent and Balenciaga, relies heavily on Gucci for the bulk of its sales and profits, drawing scrutiny over whether it can keep up momentum at the label following its revamp under designer Alessandro Michele.

The group, run by billionaire boss Francois-Henri Pinault, has said Gucci will naturally expand at a less breakneck pace over time after it more than doubled in size over the past four years, with annual sales reaching more than 8 billion euros (£6.9 billion).

In the first quarter, Gucci’s comparable revenue, which strips out the effect of currency swings, rose 20 percent, down from 28 percent three months earlier, and nearly 50 percent at the start of 2018.

That still beat the pace at rivals including LVMH’s Louis Vuitton, keeping it among the luxury industry’s clear winners at a time when some are profiting more than others from strong Chinese demand.

“Markets have already anticipated a form of normalisation (at Gucci), and we are very serene about it,” Kering Financial Director Jean-Marc Duplaix told journalists.

Gucci is adding to its product lines with items like homewares and by branching out into cosmetics as part of plans to keep growing.

At group level, Kering reported a 21.9 percent rise in first-quarter revenue to 3.8 billion euros, or up 17.5 percent on a comparable basis stripping out currency swings and the effect of acquisitions, a touch above analyst forecasts.

Sales slid at Kering’s Bottega Veneta, a brand famed for its leather handbags and which is in the midst of a reinvention under creative chief Daniel Lee. His first designs, which Duplaix said had got a good early response, will land in stores halfway through 2019.

“From the second half of the year we should see an inflection point, but it will be gradual,” Duplaix added.

In an encouraging sign for some rivals with a strong presence in mainland China, Duplaix added that demand there had shown no sign of slowing, though Chinese customers were starting to spend more at home and less overseas.

That has hit some luxury labels adjusting to these shifting consumer patterns, including Prada and Tiffany.

Reporting by Sarah White and Pascale Denis; Editing by Inti Landauro and David Holmes

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