Gucci hit hard by corona crisis in China

The coronavirus outbreak, especially in China, has a major impact on luxury group Kering: the Gucci owner saw turnover drop 15.4 % in the first quarter. Nevertheless, the fashion house is already seeing signs of recovery.

Gucci in particular

Kering was hit hard by its strong dependence on Chinese customers: sales plummeted by 15.4 % to 3.2 billion euros in the first quarter, mainly due to store closures. On a comparable basis, i.e. excluding the effects of acquisitions and exchange rate fluctuations, there was a decrease of 16.4 %.

Flagship brand Gucci, which is very successful in China, took a particularly hard hit, with comparable sales down 23.2 %. Yves Saint Laurent had a less pronounced decrease of 13.8 %. However, Kering has seen an improvement and a positive evolution in most of the group’s brands, since life in China picked up again earlier this month.

Kering had previously warned that it expected a decline in comparable sales of around 15 % in the first quarter and that operating margins would fall. On Tuesday, the company said it was implementing cost reduction measures, but did not comment further on this. Possibly, as is currently the case with many retailers, it is negotiating reductions.

More direct sales

The second quarter will be dominated by the lockdown in most Western countries, so the luxury group does not expect a significant recovery before June or July. For further conclusions it is still too early, the French company says. Nevertheless, the group believes to be well positioned for recovery.

This recovery seems to come not least from online sales, with e-commerce up 20 % in the first quarter. In China, online sales more than doubled. It therefore seems that the group, and in particular its flagship Gucci, is relying more and more on its own sales channels and less and less on wholesale partners.