Paris — Sales at Kering’s star Gucci fashion brand fell more than expected in the fourth quarter of 2020 as the Covid-19 pandemic kept consumers from travelling abroad and shopping.

Gucci accounts for 60% of revenues and 80% of profits at the French conglomerate, and has been one of the industry’s top performers in recent years. But it has struggled more than some peers in the Covid-19 crisis, despite a rebound in luxury goods demand in regions such as Asia, which fueled resurging sales at rivals such as LVMH’s Louis Vuitton.

Kering, which also owns brands such as Saint Laurent, said group revenue fell 8.2% to €4bn in October-December 2020, down 5% on a comparable basis and missing analysts’ consensus forecast cited by UBS for growth of 1%.

Gucci’s sales were down 10.3% in the quarter on a comparable basis, when analysts had expected a 4% drop.

Kering CFO Jean-Marc Duplaix told reporters the group was satisfied with Gucci’s performance, adding that the brand had many initiatives planned to return to growth in 2021, its 100th anniversary.

Investors are keeping a close watch on the extent to which Gucci is losing steam after a hugely successful, quirky makeover under designer Alessandro Michele, which saw its revenues more than double and profits treble between 2015 and 2019.

“To just look at 2020, quarter after quarter, is to take a short-term view. We have a lot of actions to return to a path of growth, taking advantage of the recovery,” Duplaix said.

Analysts said the earnings miss at Gucci is likely to weigh on the group’s share price and trigger some changes to bolster the brand.

“We believe Gucci management will work hard to open a successful ‘new chapter’ of growth in the coming year aimed at capturing an older, non-millennial demographic and rebalancing product/price/age mix with a slight change in aesthetics and merchandising,” said Thomas Chauvet of Citi.

Duplaix said trends across China and Asia, as well as the US, remained supportive in the first weeks of 2021 for the luxury market, though Europe was tougher.

Kering can also find some comfort in the positive performance of its other, smaller brands, particularly with Bottega Veneta which increased 2020 sales by nearly 5%.

Duplaix said the group was happy with how the year has started but gave no figures for current trading, including the key Chinese New Year holiday in mid-February.

Restrictions on travel, dining out and other activities, such as skiing, remain in place in many countries to fight the pandemic, weighing on tourist inflows and spending.



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