Kering Jumps as Gucci’s Strong Sales Bode Well for Christmas

Updated on
  • Shares rise to highest in more than 15 years as sales jump
  • Gucci’s revenue increased at strongest pace in five years

A gold leather handbag sits in the window display of a Gucci luxury goods store, operated by Kering SA, in Lugano.

Photographer: Akos Stiller/Bloomberg

Kering SA shares rose to the highest in more than 15 years after strong demand for new Gucci handbags and sandals contributed to the fastest quarterly sales growth since 2012, boding well for luxury-goods makers as Christmas approaches.

The stock jumped as much as 8.3 percent to 204.10 euros in Paris, the highest since June 6, 2001, when the company was known as Pinault-Printemps-Redoute. The gain was the steepest in about a year.

A 10.5 percent increase in third-quarter organic sales represented the strongest gain in more than three years and topped analyst estimates of about 7 percent. Growth was led by Gucci, Kering’s biggest brand, as products such as $2,000 Sylvie leather shoulder bags and $1,100 Red Malin spike leather sandals appealed to shoppers including millennials.

Gucci sales rose 17 percent in the quarter, benefiting from Chief Executive Officer Marco Bizzarri and creative director Alessandro Michele’s efforts to turn around the Italian luxury house. Michele, then a little-known designer, landed the role in January after the label faced more than a year of almost no growth. From his first collection featuring pleated red leather skirts and sheer pussy-bow blouses to his 1970’s-inspired vision for spring-summer 2016, Michele brought a buzz back to the brand that it hasn’t seen since the days of Tom Ford.

“Gucci has got its mojo back,” Carole Madjo, an analyst at Haitong Research, said in a note. “Growth should continue thanks notably to the increasing penetration of Gucci’s new offer.”

New products made up more than 80 percent of Gucci’s sales in the quarter, up from some 70 percent the previous quarter, Chief Financial Officer Jean-Marc Duplaix said on a conference call. That share will continue to increase in the fourth quarter, though won’t reach 100 percent, he said.

Duplaix also said Gucci’s margin could improve by about 1.5 percentage points in the second half compared with the same period last year.

Kering joins industry leader LVMH in reporting estimate-beating sales, indicating that the peak holiday season may see strong demand and potentially giving the luxury industry some respite after demand was weighed down by weakness in Asia and a slowdown in European tourism following terrorist attacks in the region.

“For the luxury sector, this is another example of current trading picking up as we get closer to the key festive season,” Rogerio Fujimori, an analyst at RBC Capital, wrote in a note.

Not all luxury-goods makers are having such a good time of it. U.K. trenchcoat maker Burberry Group Plc this month reported declines in its Asian business, while Hermes International SCA recently abandoned a long-standing forecast for annual sales growth of 8 percent. Richemont, the maker of Cartier jewelry, forecast a 45 profit plunge for when it reports first-half results next week.

In addition to Gucci, Kering benefited from a 34 percent gain in organic revenue at Saint Laurent, helped by the addition of new collections such as Sunset Monogramme handbags. Sales at the Puma sporting-goods unit rose 11 percent.

One black spot was Bottega Veneta, where sales dropped about 11 percent, the most in seven years, weighed down by a slowdown in tourism. Duplaix said a revival in the brand’s sales will be progressive, with more growth expected in the second half of 2017 as it seeks to become less dependent on Asian customers.

(Updates with Gucci details from third paragraph.)
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