France’s Ker­ing shares drop on strug­gling Gucci sales

The China Post - - BUSINESS INDEX & -

Share prices of French luxury and sports cloth­ing group Ker­ing fell sharply in Paris Wed­nes­day on news of dis­ap­point­ing first quar­ter per­for­mance by its Gucci unit.

Though Ker­ing re­ported a rise in first quar­ter group rev­enues of 11.4 per­cent to 2.7 bil­lion eu­ros (NT$89.624 bil­lion; US$2.9 bil­lion), in­vestors dumped its stock on word of slow­ing sales of luxury brand Gucci, which ac­counts for 60 per­cent of group profit.

In mid-day trad­ing, Ker­ing stock had slumped by just over 6 per­cent to 167.30 eu­ros per share.

“Group rev­enues, up in the first quar­ter of the year, re­flect a com­plex eco­nomic and mon­e­tary en­vi­ron­ment as well as the tran­si­tion un­der­way at Gucci,” Ker­ing chief ex­ec­u­tive Fran­cois-Henri Pin­ault said in a state­ment, in which he also noted “tough mar­ket con­di­tions over­all in the Asia-Pa­cific re­gion” fac­ing Gucci.

“Our pri­or­ity to­day is to give our flag­ship luxury brand fresh im­pe­tus and we are con­fi­dent in the suc­cess of the ac­tion plans ini­ti­ated by the new teams, both on a cre­ative and or­ga­ni­za­tional front,” Pin­ault said.

Ben­e­fi­cial ex­change rate ef­fects helped Gucci sales in­crease by 3.7 per­cent in the first quar­ter com­pared with the same pe­riod last year. But on a com­pa­ra­ble ba­sis that strips out ex­change rate ef­fects Gucci’s sales fell by 7.9 per­cent.

That weak­en­ing ac­tiv­ity, said Aurel BGC an­a­lyst David Da Maia, “seems to con­firm that sub­per­for­mance by Gucci com­pared to its ri­vals is wors­en­ing,” which risks drag­ging Ker­ing group re­sults for much of the year.

“As we feared, or­ganic growth slowed strongly in the quar­ter ... due to a par­tic­u­larly dif­fi­cult start of the year for the luxury unit,” Da Maia said.

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