Kering sinks in Paris and weighs on luxury after warning on Q1 sales

(Il Sole 24 Ore Radiocor) - Thud of Kering on the Paris Stock Exchange (CAC 40 ), after warning about first-quarter sales due to the worse-than-expected performance of Gucci, the group's flagship brand. In the wake, other luxury biggies lost ground: Lvmh and Hermes on the transalpine exchange and Burberry in London (FT-SE 100). In Milan, damage limitation Moncler and Brunello Cucinelli.

After the close of the eve's trading session, Kering warned that it expects a drop in sales on a comparable basis of 10% year-on-year in the first quarter. "The trend primarily reflects a sharper decline in Gucci sales, particularly in the Asia Pacific region. On a comparable basis Gucci's first quarter revenues are expected to decline by almost 20% year-on-year," says a statement from Kering, which expects "a complex first half". The group, which has been aiming for the relaunch of Gucci for some time and appointed Sabato de Sarno as its new artistic director a little over a year ago, is in fact referring to the old collections, as "the first products, mainly ready-to-wear, of the Ancora collection (which is signed by de Sarno, ed.) have been offered in a select number of Gucci shops since mid-February. The new collection, the availability of which will be gradually expanded in the coming months, is being very well received. Kering also said it was suffering from negative effects from currency movements, which more than offset the positive contribution from the results of Creed Perfume, consolidated since 1 November. The combined effect of these two effects on revenue for the current quarter is estimated by the group to be between -1% and -2%. The group will announce its revenue for the quarter on 23 April.

The warning issued by Kering "is a quite worrying signal for the luxury sector," Citi commented in a note sent to clients, adding that analysts at this point should cut their estimates for Kering's current operating profit and earnings per share by 15%. Jp Morgan experts say they are surprised because Kering's announcement contradicts statements made by the group when it released its fourth quarter results last month that Gucci's business momentum in Asia Pacific was seen to be improving. At Gucci, "the transition will take time," they predict at JPMorgan, noting that the lack of momentum in older collections will continue to weigh on overall sales and earnings growth. Analysts at Equita highlight the "cautious indications" on the first quarter, particularly for Gucci, and cut their estimate of sales by 2% and net profit by 6%, or 7% below consensus. In turn, the target price is cut by 7% in the €410 area. The financial intermediary's experts, however, see Gucci's difficulties as 'brand specific' and confirm their preference for Moncler. The Kering group also includes Saint Laurent, Bottega Veneta, Balenciaga, Alexander Mc Queen, Brioni, Boucheron, Pomellato and Ginori 1735.