Gucci owner Kering flags China virus uncertainties after strong fourth quarter

PARIS (Reuters) – Kering (PRTP.PA) said on Wednesday the coronavirus epidemic in China could heighten uncertainties for the luxury goods market, as the group posted higher-than-expected sales for the fourth quarter of 2019, helped by its star brand Gucci.

FILE PHOTO: The logo of Kering is seen during the company’s 2015 annual results presentation in Paris, France, February 19, 2016. REUTERS/Charles Platiau/File Photo

The company said the virus outbreak, which has particularly affected its key Chinese market, could have an impact on “consumption trends and tourism flows, and their ability to affect economic growth.”

Last year Kering, like other luxury labels, managed to offset a sharp decline in sales in Hong Kong, due to months of protests in the Chinese-ruled city, thanks to strong growth in mainland China.

But with entire cities in the world’s second biggest economy shut off, flights canceled and many countries banning entry to visitors coming from China, Kering and other high-end houses could face a major sales hit.

Kering’s financial chief Jean-Marc Duplaix told reporters the company “remained very confident about its growth potential in the medium and long term” despite the current uncertainty.

Kering’s revenues rose 13.8% to 4.36 billion euros ($4.76 billion) in the October to December period, up 11.4% on a like-for-like basis, which strips out currency changes and acquisitions.

That was broadly in line with its performance in the previous quarter and beat analyst forecasts, despite sales halving in Hong Kong, according to Duplaix.

Kering, which also owns brands like Saint Laurent and Balenciaga, now relies on Gucci for 83% of its recurring operating income.

Duplaix said Gucci had returned to growth in the United States in the fourth quarter after an advertising and diversity campaign helped reverse a decline in sales there.

The group posted a 37.4% drop in net income for 2019, penalized in part by a record Italian tax settlement of 1.25 billion euros linked to Gucci.

Italian puffer jacket maker Moncler warned this week that shopper numbers at its stores in China had plunged 80% since the coronavirus outbreak, while jewelery maker Pandora has said business in the country had ground to a halt.

Reporting by Sarah White and Silvia Aloisi; editing by Mark Potter

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