Kering SA fell the most in about six months after third-quarter revenue trailed estimates amid the weakest growth in four years at the Gucci luxury-goods brand.
The shares retreated as much as 4.7 percent to 164.5 euros, the steepest intraday decline since April 26. They were down 2.5 percent at 168.30 euros as of 10:27 a.m. in Paris.
Sales from continuing operations declined 1.5 percent to 2.52 billion euros ($3.48 billion), Paris-based Kering said after markets closed yesterday. Analysts predicted 2.55 billion euros, according to the median of 14 estimates compiled by Bloomberg. Excluding acquisitions and currency fluctuations, revenue rose 3.4 percent, the company said.
Kering follows LVMH Moet Hennessy Louis Vuitton SA in reporting slowing growth as Gucci and LVMH’s Louis Vuitton brand tighten distribution and raise prices in an effort to appeal to the wealthiest shoppers. Gucci’s comparable sales advanced 0.6 percent in the third quarter, versus an average analyst estimate for growth of 2.1 percent. That was the weakest performance since the third quarter of 2009, when sales fell 7 percent.
“Gucci was clearly weaker than expected” with growth slowing for a fourth straight quarter, said Thomas Chauvet, an analyst at Citigroup Inc. in London. “This partly reflects self-inflicted disruption from a brand-elevation strategy.”
Gucci is introducing logo-free leather handbags such as the Bamboo Shopper and Lady Lock, which costs $2,290, and trimming wholesale accounts as well as converting some outlets to directly operated shops.
The adoption of a more exclusive strategy, which led to a 10 percent increase in average selling prices, “adversely affected third-quarter store traffic” for the brand in the Asia-Pacific region, Kering said. Gucci’s sales in China fell in the quarter, Chief Financial Officer Jean-Marc Duplaix said on a call with reporters, declining to specify the drop.
“The elevation of the brand is clearly an ongoing process, and it will take time,” Duplaix said on a call with analysts, echoing comments last week by LVMH CFO Jean-Jacques Guiony regarding Vuitton, whose sales grew less than 3 percent between July and September on an organic basis.
Sales at the rest of Kering’s luxury division, which includes Bottega Veneta, Saint Laurent and Balenciaga, also trailed estimates on a comparable basis.
Kering’s performance confirms luxury growth is moderating in the second half of the year, according to Luca Solca, an analyst at Exane BNP Paribas in London.
The Puma sporting-goods brand performed better than expected as comparable sales declined only 0.8 percent in the quarter, compared with the 2.3 percent slide predicted by analysts. Puma sales developed positively in North America, though remained under pressure in western Europe, Kering said.
Puma is “on track” to meet its full-year sales guidance of a low-to-mid single-digit percentage decline in currency-adjusted sales, Duplaix said on the analyst call.