Kering Forecasts ‘Improving Trends’ For Luxury On Mainland

    The luxury conglomerate's first-quarter financial report shows a hint of optimism for China this year despite the ongoing anti-corruption campaign.
    Jing Daily
    Jing DailyAuthor
      Published   in Finance

    Gucci brand ambassador Li Bingbing in an ad campaign for the brand. (Gucci)

    Top global luxury conglomerate Kering sees a light at the end of the tunnel when it comes to slowing China luxury sales growth, according to its first-quarter report for 2014 released today.

    The parent company of Gucci, Bottega Veneta, and Balenciaga saw 13 percent total global revenue growth in its luxury sector for the first quarter of the year, with 10 percent growth in the Asia-Pacific region. While Bottega Veneta remained a bright spot for the corporation with 22 percent mainland China growth, Gucci’s gains remained modest with a 2 percent Asia-Pacific increase.

    However, the report noted that Gucci is seeing “improving trends in mainland China” with a host of new changes being made by the company. China’s anti-corruption campaign and a consumer shift away from logos have been leading to lackluster growth for Gucci and other mega-brands such as Louis Vuitton over the past year. “For Gucci, the trends are still negative but improving,” said Kering Chief Financial Officer Jean-Marc Duplaix on a conference call today.

    As a result, Gucci continues to adopt a strategy to cut down on logo-heavy products, and its no-logo items took up 51 percent of sales in China this quarter, said Palus. Non-logo handbags now take up 63 percent of Gucci’s inventory, a number that’s up from 48 percent during the first quarter last year. The brand has also been making major leadership changes in Asia, and is currently in the midst of searching for a new China CEO.

    In order to gain more China expertise among its employee ranks, Kering recently launched a new education program with Tsinghua University, while Bottega Veneta created a luxury management scholarship for Chinese-speaking students.

    Chinese tourism in Western Europe also led to growth for the conglomerate’s luxury brands, according to the conference call. Duplaix stated that growth is also shaping up in Chinese-tourist heavy Macau and Hong Kong. “We believe the situation is improving in China,” he said, but “the full impact of the initiatives taken” will be clearer in the second half of the year.

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