Kering Rises as Sales Beat Estimates, Bucking Industry Gloom

  • New leadership and products help boost Saint Laurent
  • Efforts to revive Gucci are cause for optimism, analyst says

Kering SA shares rose to a two-month high after the French luxury-to-sporting-goods maker reported third-quarter revenue growth that beat analysts’ estimates on demand for Puma footwear and Saint Laurent dresses.

Sales climbed 3.1 percent on a comparable basis, Kering said Thursday after European markets closed. Analysts predicted growth of 2.8 percent, according to the median of 21 estimates. The Paris-based company repeated its full-year forecast for mid-single digit revenue growth. The shares advanced 6.3 percent to 166 euros at 9 a.m. local time.

Better-than-expected sales from Saint Laurent and Puma helped Kering buck the trend of downbeat results from luxury-goods makers and offset declining sales of Gucci handbags. Saint Laurent is benefiting from fresh leadership as creative and image director Hedi Slimane’s 1,150-euro ($1,283) bags and 3,200-euro leather jackets help make it one of the industry’s fastest-growing brands. Footwear sales boosted Puma’s growth, Kering said.

“Kering breaks a series of disappointing updates by luxury-goods companies,” said Exane BNP Paribas analyst Luca Solca. Gucci’s efforts to overhaul management and merchandise “should give cause for reasonable optimism” in the fourth quarter.

Sharp Contrasts

U.K. trenchcoat maker Burberry Group Plc said last week profit will probably decline for a second straight year, while LVMH’s sales also missed estimates. China’s anti-extravagance push and the yuan’s devaluation have hurt demand for luxury there. U.S. growth, meanwhile, has slowed as financial market turmoil and the strong dollar crimp spending among residents and tourists. Kering said the quarter was characterized by sharp contrasts across regions.

Saint Laurent and Puma’s performance contrasted with Gucci, Kering’s largest brand. Sales at the handbag maker fell 0.4 percent compared with the 0.3 percent decline predicted by analysts. That follows a 4.6 percent gain in the previous quarter when sales rebounded after discounts of as much as 50 percent in China on old merchandise.

Kering pointed to the enthusiastic response to Gucci creative director Alessandro Michele’s debut collection, which only arrived in stores a month ago, citing double-digit growth of his new handbag designs and improving wholesale trends. Kering has said 2015 is a year of transition for the brand.

“The market expects this new collection” and other initiatives such as a new store design and website “to reignite momentum for Gucci,” said Rogerio Fujimori, an analyst at RBC Capital Markets. He predicts 4 percent organic sales growth in 2016.

Total third-quarter revenue reached 2.9 billion euros, matching estimates.

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