Gucci owner Kering warns of fall in Q1 sales

[PARIS] Kering, the French luxury goods group behind brands such as Gucci, said on Friday it expected comparable sales to fall by around 15 per cent in the first quarter as the coronavirus outbreak saps demand and forces it to close stores.

The health crisis first hit China - a major market for high-end wares - before spreading elsewhere, and several European states including Italy, Spain and France have gone into lockdown to try to cope.

Gucci is one of the world's biggest luxury labels by sales and had been booming in recent years.

The group said the Chinese market had begun to pick up again but that in the United States and Europe the situation was worsening and would affect second-quarter sales too.

Kering said it expected operating margins to decline, adding it had implemented "an initial action plan aimed at adapting its cost base and containing its working capital requirement," without giving further details.

"The epidemic does not call into question the structural drivers of the luxury industry," Kering said. It is due to report first-quarter sales on April 21.

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The firm, which also owns Saint Laurent and Balenciaga, has been one of the big winners of a luxury goods bonanza in recent years, alongside rivals such as Paris-based LVMH, the owner of Louis Vuitton.

That has put the cash-rich conglomerates in a stronger position than some standalone brands that were already in turnaround mode when the coronavirus crisis hit.

Britain's Burberry said this week that like-for-like sales in the final weeks of its financial year to March 28 would be down 70 per cent to 80 per cent, and as a result its fourth-quarter sales would be 30 per cent lower.

Analysts at Citi said Kering's forecast seemed "better than feared and much better than some peers having recently provided guidance."

Luxury goods companies are also hugely dependent on tourist flows and visitors to shopping capitals such as Paris or New York, and are reeling as air traffic plummets as a result of the health crisis.

Several governments have ordered non-essential retailers such as clothing stores to close temporarily, to protect workers and contain the spread of the virus.

REUTERS