The global pandemic has taken a toll on luxury retail conglomerate Kering, with a substantial 43.7% decline in sales in the second quarter. Despite this setback, there is a glimmer of hope for the company as one of its brands, Bottega Veneta, managed to limit the drop in revenue compared to its counterparts.
The decline in sales for Kering, although slightly better than expected, still poses challenges for the company. Analysts had predicted a 46% fall, while rival LVMH saw a 38% decrease in sales. However, operating margins for both companies were impacted, with Kering’s shrinking to 17.7%.
The luxury industry as a whole has been greatly affected by the pandemic, leading to uncertainty regarding revenue trends for the remainder of the year. The absence of tourist flows remains a significant factor that will continue to impact the industry, according to Kering’s Chief Financial Officer. The company is implementing cost-cutting measures while still investing in its brands to maintain visibility.
Gucci, Kering’s top brand, experienced a significant 45% drop in sales in the second quarter, while Yves Saint Laurent saw a 48% decline. In contrast, Bottega Veneta’s revenue only decreased by 24.4%, showcasing its resilience during these challenging times. Store closures and production pauses have been common among luxury retailers due to the pandemic’s spread.
Despite the challenges, there has been a notable increase in online sales for Kering. Online revenue accounted for 18% of total sales in the second quarter, doubling from the beginning of the year. This shift towards e-commerce could potentially reshape the luxury industry’s future.
Investors expressed disappointment as shares in Kering closed down by 2.7% following news of declining core profits at LVMH. The path to recovery for the luxury industry remains uncertain, underscoring the obstacles faced by companies like Kering during these unprecedented times.
For more information on Kering and its brands, visit their official website here. To learn more about the impact of the pandemic on the luxury industry, click here.
