Kering Reports Strong Recovery in China Amid Prolonged Slump

On July 28, Kering, the French luxury group, announced its first-half 2020 results ending on June 30. Consolidated revenues for the period fell 29.6 percent to 5,378.3 million euros, representing a decline of 30.1 percent on a comparable basis. As Chairman and Chief Executive Officer François-Henri Pinault described, “It is fair to say that the first half of 2020 has been the toughest period we have faced.”

Due to the continuing lockdown and store closures in April, Kering’s retail sector in the second quarter was struck harder than the preceding three months. Meanwhile, the group’s luxury houses were impacted by disrupted production and logistics, as well as travel retail grinding to a halt and a continued tightened control over distribution in the long term.

Gucci, Kering’s cash cow, posted a decline in retail and wholesale revenue by 43 and 54 percent, respectively. According to Kering’s chief financial officer, Jean-Marc Duplaix, Gucci’s recovery in the Asia Pacific (APAC) region started in mainland China and spread to South Korea and Taiwan. However, “some Asian markets, as well as all key European countries, are heavily penalized by the lack of Chinese tourism,” he added. Two other core brands for the group, Yves Saint Laurent and Bottega Veneta, reported revenues drops of 30 and 8.4 percent, respectively.

Despite the overall turbulence in the luxury industry, Kering remains confident in their strategic vision, which has been validated by their somewhat resilient performance. In particular, the group bet on young consumers who show increased demand for transparency and a persistent appetite for luxury. As Kering’s group managing director Jean-François Palus highlighted in the earnings call, their leading sustainability commitment and new technologies-powered touchpoint optimization has aligned well with millennials and Gen Z consumers. Moreover, Kering is hoping to weather the crisis through online acceleration and a demand-driven supply chain, which is expected to safeguard the profitability of the group amid the gloomy period that lies ahead.

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