Luxury conglomerate Kering was set to have a strong start to the year, but the coronavirus has weighed heavily on its business, sending first-quarter revenue falling double digits.
“The COVID-19 pandemic took a heavy toll on our operations in the first quarter,” said CEO François-Henri Pinault in a press release announcing the quarterly results.
The quarter was off to “an exceptionally good start” in January, said Kering, but things turned sour in February as a result of store closures in the Asia-Pacific region.
In March, the situation deteriorated even further as stores closed across Europe and the U.S., followed by a halt in tourism and the partial closure of the company’s production and logistics facilities near the end of the quarter.
Overall revenue totaled €3.20 billion ($3.47 billion), a 16 percent decline on a comparable basis.
The company refers to its top-performing brands Gucci, Yves Saint Laurent and Bottega Veneta as its “main” houses while its watch and jewelry offerings, as well as Balenciaga and Alexander McQueen, fall into the “other houses” division.
First-quarter revenue in the “others” division totaled €553.3 million ($600.3 million), a 5 percent dip on a comparable basis.
The category’s soft luxury goods, including couture and leather goods, put on “a resilient retail performance” with strong sales in Western Europe and the U.S. offsetting declines in Asia-Pacific and Japan. Wholesale in soft luxury goods stayed strong.
That was not the case for hard luxury, including the watches and jewelry segment, which was “hit hard by the crisis,” said Kering.
“Conditions were tougher in hard luxury, which faced significant disruption in wholesale, a major channel for this division,” said Chief Financial Officer Jean-Marc Duplaix on the earnings call Tuesday morning.
Boucheron and Pomellato in particular suffered as both brands are “heavily dependent” on Western Europe, said Duplaix, and felt the “severe impact” of the closing of their networks.
In contrast, Qeelin, a jewelry brand inspired by Chinese symbolism, performed well, benefitting from collaboration with distribution partners and a rebound in mainland China, said Duplaix.