Kering Says China’s COVID Restrictions Slowed Luxury Sales

Gucci bags

Global luxury group Kering ran into headwinds during the fourth quarter.

The group recorded a year-over-year decline in sales of 7% on a comparable basis during the quarter ended Dec. 31. Gucci, which accounts for half its revenue, was down 14%. Yves Saint Laurent was up 4% and Bottega Veneta was up 6%, while and its other houses — including Balenciaga, Alexander McQueen and Brioni — were down 4%, according to a Wednesday (Feb. 15) press release.

For the full year of 2022, however, Kering’s group revenue was up 9% on a comparable basis.

“All our houses posted record revenues and contributed to higher operating income in 2022,” Kering Chairman and CEO François-Henri Pinault said in the release. “But these good performances were not uniformly up to our ambitions and potential.”

The group’s fourth-quarter trends contrasted with those of two of its rivals. LVMH reported in January that it was confident it can maintain the record revenue it saw in 2022, while Hermes said in October that it has seen no slowdown in any of its markets and was going to raise prices.

Kering attributed its slowdown — and especially that of Gucci — to the COVID-related restrictions that were still in place in China during the quarter.

Media have reported other troubles for the company as well. The Financial Times noted that Gucci is having a leadership transition after its creative director left abruptly in November, while the Wall Street Journal pointed to controversy around Balenciaga ads that included children and that the brand later said never should have happened.

Looking ahead, Kering said in the release that it will continue investing in building the desirability of its products, the exclusivity of their distribution and the quality of the customer experience.

Across the luxury industry, players expect that the end of China’s COVID restrictions — which Kering said have been a challenge for the company — will allow for the return of consumers who purchased about one-third of the world’s luxury goods in the pre-pandemic year of 2018.

“In an environment that remains uncertain, I have no doubt that 2023 will be another year of success for our houses and of growth for our group,” Pinault said in the release.

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