Wednesday, February 26, 2020

Gucci Owner Kering Halts Spending in China on Coronavirus Fears

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PARIS—Gucci-owner Kering has closed half of its stores in China and shelved new openings and advertising campaigns there as the coronavirus outbreak throws luxury brands into turmoil.

The French group, which also owns Saint Laurent and Balenciaga, remained upbeat about its longer-term prospects as it beat fourth-quarter sales forecasts on Feb. 12.

But like rivals, it said disruptions were inevitable from an outbreak that has emptied malls and shopping streets in China, which accounts for more than a third of luxury goods sales.

“We are seeing a sharp drop in traffic and sales in mainland China,” Chairman Francois-Henri Pinault said, adding shops in China that remained open, including in Hong Kong, were on reduced hours.

Kering is postponing store renovations and new openings, as well as reviewing product launches in China, Pinault added.

“We are reallocating inventory to other regions of the world to make sure we are not overstocked in China” he said, without giving an estimate for any impact from the virus on earnings.

Italian puffer jacket maker Moncler said this week shopper numbers at its Chinese stores had plunged 80 percent since the virus outbreak, while jeweler Pandora has said business in the country had ground to a halt.

Kering makes 34 percent of its sales in Asia Pacific, excluding Japan. Spending on its brands by Chinese customers, who have traditionally shopped with it overseas, has shifted overwhelmingly to mainland China, where the new coronavirus, COVID-19, originated.

Entire cities in the world’s second biggest economy are now shut off, flights have been cancelled and many countries are banning entry to visitors coming from China, exposing Kering and other high-end houses to a major sales hit.

The crisis has compounded a plunge in sales in Hong Kong due to months of pro-democracy protests. Kering’s fourth-quarter sales in the Chinese territory halved.

Nonetheless, group revenue rose 13.8 percent to 4.36 billion euros ($4.76 billion) in October-December, helped by demand in China prior to the virus outbreak. That equated to an 11.4 percent…

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