Virus impact has Kering revenue down 13-14%
Kering, the group behind luxury brands such as Gucci and Bottega Veneta, has published initial estimates for the impact of the coronavirus outbreak.
Accounting for all key markets and brands, Kering estimates that its consolidated revenue for the first quarter of 2020, ending March 31, should show a decline of 13% to 14% in reported terms (down around 15% in comparable terms) as compared with the first quarter of 2019.
Kering said it is observing encouraging signs in Mainland China, where the drop in store traffic and subsequent sales is lessening. However, other Asia Pacific markets continue to be significantly impacted and “the situation has substantially deteriorated in recent weeks in Western Europe and, more recently, North America”.
Given these factors, Kering predicted that revenue in the second quarter of 2020 will be sharply impacted by the effect of the epidemic on local clienteles and tourism. The group also said there is likely to be a first half 2020 recurring operating margin in decline, though it was deemed premature to quantify by how much due to the ever- changing situation.
Kering said it has implemented an “initial action plan aimed at adapting its cost base and containing its working capital requirement” and that the group is considering how to “mitigate the dilution of its recurring operating margin throughout the year, while protecting its Houses’ market positions and preserving their growth potential and capacity to bounce back in the short and medium term”.
The company also said: “Faced with the worldwide health emergency resulting from the COVID-19 epidemic, the health and safety of the teams at Kering and its Houses are the Group’s utmost priority. The commitment, cohesion and resilience demonstrated by Kering’s people in the current circumstances must be commended.”
