Kering Q3 revenue drops 16% on Asia-Pacific weakness

Investing.com -- Kering stock dipped Wednesday after it reported a sharp decline in third-quarter revenue, impacted by slowing demand in key markets like Asia-Pacific and Japan.

The luxury group's revenue fell 16% on a comparable basis, totaling €3.8 billion.

Chairman and CEO François-Henri Pinault acknowledged the challenging environment: "The whole luxury sector faces unfavorable market conditions. This severely impacts our performances in the short term."

He emphasized the company's focus on transforming operations, particularly at Gucci, and on cutting costs to achieve "sound, sustainable growth."

Gucci, Kering (EPA:PRTP )'s flagship brand, posted a 25% decline in comparable revenue, bringing in €1.6 billion.

Sales were particularly weak in Asia-Pacific, and wholesale revenue fell 38% due to a strategic reduction in distribution channels. The brand's performance is expected to improve as new leather goods introduced late in the quarter hit the market.

Yves Saint Laurent also saw weaker sales, with revenue down 12% on a comparable basis to €670 million. While new leather product launches are expected by year-end, the slowdown in retail activity and a 20% drop in wholesale revenue weighed on the quarter.

Bottega Veneta was a rare bright spot, achieving a 5% increase in comparable sales, driven by strong demand in North America and Western Europe. Its leather goods collection performed particularly well, contributing to a 9% growth in direct retail sales.

Other brands within Kering's portfolio, including Balenciaga and Alexander McQueen, also struggled, with overall revenue from smaller houses declining 14%.

Looking ahead, Kering warned of continued uncertainty in consumer demand. The group now expects 2024 operating income to reach approximately €2.5 billion, reflecting the challenging economic and geopolitical environment.

"Overall, we were expecting a challenging 3Q print, and some level of reduction in FY24E EBIT guidance, however the magnitude of earnings erosion in the short term is worse than expected," RBC analysts said in a reaction note to Kering's Q3 results.

They added that "this also raises questions on the shape of earnings recoverability in FY25E where we are likely to see further downgrades."

Source: Investing.com