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Earnings

Kering sales recover from virus hit, though Gucci lags

PARIS/MILAN (Reuters) - French luxury group Kering PRTP.PA confirmed a broad recovery in sales of high-end goods in the third quarter as strong Asian and U.S. demand helped revenues improve, though its star Gucci brand underperformed rivals.

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Kering, which also owns Saint Laurent, beat market expectations with comparable sales nearly unchanged in the third quarter from a year earlier.

Like-for-like sales, which strip out the impact of foreign exchange and acquisitions, dropped by 1.2% in the three months to September, compared with analyst forecasts for an 8% to 13% fall and after plummeting nearly 44% in the previous quarter.

Like rivals such as Birkin-handbag maker Hermes HRMS.PA and Louis Vuitton owner LVMH LVMH.PA, Kering was hit hard by store closures during coronavirus-related lockdowns.

Gradual re-openings have helped sales pick up, even though new restrictions are now being imposed across Europe to contain a spike in case numbers.

Kering struck a cautious note about the coming months, with Financial Chief Jean-Marc Duplaix saying the outlook remained extremely uncertain.

He added that Gucci had done very well in the United States, where it gained market share, and in the key Chinese market, but had still been penalised by global travel restrictions.

“Gucci has perhaps suffered more than others from the lack of tourist flows,” Duplaix told reporters.

Comparable sales at Gucci, one of the fastest-growing luxury brands of recent years, fell 8.9% in the period, while all the group’s other fashion labels grew. Bottega Veneta had a particularly strong performance, with sales rising 21%.

Gucci accounts for nearly 60% of Kering’s revenues and investors are keeping a close watch on the extent to which it could lose steam after a hugely successful, quirky makeover under designer Alessandro Michele.

Analyst questions during an earnings call with management focused almost entirely on the brand, given that it lagged rivals such as Hermes, which earlier on Thursday reported 7% sales growth in the quarter.

A strong rebound at Louis Vuitton and Christian Dior also helped LVMH’s fashion and leather goods division increase like-for-like revenues by 12%.

Duplaix said Gucci’s brand momentum was still very strong but acknowledged there was room for improving its performance with local customers. He flagged more marketing investments and initiatives to support its upcoming fashion collection.

He also said the group was working to re-balance Gucci’s range of products in stores to appeal to a wider client base, by including classic pieces such as re-editions of popular handbags.

He said it was difficult to say whether the brand’s surge in U.S. sales would be repeated in coming months given the uncertainty hanging over the looming presidential election, and more generally the state of the U.S. economy.

“The key question for Kering is how fast and effectively Gucci will be able to renew itself,” said Luca Solca, an analyst at Bernstein.

Reporting by Silvia Aloisi; Editing by Sarah White and Jan Harvey

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