Kering's Gucci posts worse-than-expected Q1 sales drop

Kering's Gucci posted a steeper-than-expected decline in first-quarter sales on Tuesday, which it blamed on a transition period as its flagship brand works to regain momentum under a new creative and management duo.

Kering's Gucci posted a steeper-than-expected decline in first-quarter sales on Tuesday, which it blamed on a transition period as its flagship brand works to regain momentum under a new creative and management duo.

Gucci, which accounts for nearly 60 percent of Kering's operating profit, saw comparable sales fall nearly 8 percent in the three months to March 31, while analysts had expected a drop of 3-6 percent.

"Our priority is to give Gucci new impetus," Kering Finance Director Jean-Marc Duplaix said.

Duplaix reiterated Kering's previous prediction that Gucci's performance would only start to improve in the second half of the year.

Kering sacked Gucci's chief executive and designer in December to try to stem the brand's declining sales. It named Marco Bizzarri as new CEO, after he oversaw the stellar growth of Bottega Veneta, and promoted in-house designer Alessandro Michele as creative head.

Gucci's quarterly wholesale revenue fell 23 percent, two thirds of which was due to account closures mainly in Europe, Duplaix said.

Sales at Gucci's own retail network of 502 stores fell 4 percent in the quarter, including a 10 percent slide in the Asia-Pacific region. However, the brand's retail revenue remained stable in North America and rose 6 percent in Western Europe.

Asked about moves by rival brands such as Chanel to cut prices in Asia to reduce discrepancies with Europe, Duplaix said the group did not want to react immediately.

"There is no price harmonisation policy," Duplaix said. He added that for certain brands and products there could be some harmonisation across regions, excluding value added tax or customs duties.

Kering's Bottega Veneta brand also saw a slowdown in the first quarter, with revenue growth limited to 3.1 percent on a comparable basis, down from 12.6 percent in 2014.

Duplaix blamed poor trading in Hong Kong and Macao, where tourist flows dried up after last year's pro-democracy protests and where Bottega Veneta made 19 percent of its sales.

Kering's Puma sports brand posted a 13 percent rise in sales to 825 million euros in the first quarter, up 4.5 percent on a comparable basis.

Group first-quarter sales rose 11.4 percent to 2.651 billion euros ($2.85 billion), down 0.6 percent on a comparable basis.

Duplaix added that the sale process for Kering's Sergio Rossi shoe brand was "ongoing".

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