By Joshua Kirby


Kering said Wednesday that it is confident of growth in the year ahead, despite lower profitability and a fourth-quarter sales decline at its core brand Gucci.

Fourth-quarter revenue at the French luxury-goods group fell 7% on a comparable basis to 5.28 billion euros ($5.67 billion), short of analysts' expectations for EUR5.48 billion, according to a FactSet-compiled poll.

Gucci, which contributes a majority of group revenue, booked a 14% drop in fourth-quarter sales, Kering said, pointing to the situation in China, where strict pandemic measures remained in place in the quarter.

But in other markets including the U.S., Gucci was up against high comparison bases after a burst of postpandemic growth, finance chief Jean-Marc Duplaix said in a conference call ahead of the results.

In contrast, the luxury-fashion division of rival LVMH Moet Hennessy Louis Vuitton SE booked 10% organic sales growth in the quarter at its update last month.

For the year as a whole, Gucci booked stagnant sales and operating profit. The brand's operating margin slipped to 35.6% from 38.2% the previous year amid high investment aimed at nurturing future growth, Kering said. The group's overall margin fell close to one point to 27.5%.

Kering's other-houses division, home to Balenciaga, meanwhile booked a 4% decline in the year's final quarter; Kering pointed to a "difficult" December for the brand, which was embroiled in a controversy over a photoshoot that appeared to include inappropriately sexual props.

The group's two other largest brands, Yves Saint Laurent and Bottega Veneta, helped offset this with rising sales in the period, Kering said.

Despite the challenging end to 2022, Kering said it is confident of profitable growth in 2023. In China, an end to strict pandemic measures led to a "very encouraging" start to the year, Mr. Duplaix said.

The weakness in fourth-quarter revenue was likely expected, and the focus now will turn to Gucci's turnaround in the coming months, analysts Piral Dadhania and Richard Chamberlain at RBC Capital Markets said in a note.

"The key focus will be on the change in creative direction at Gucci and other strategic changes being implemented at Kering's most important brand," they said.

The group last month appointed Sabato de Sarno as the new creative chief at Gucci, filling a vacancy left open since the departure of Alessandro Michele toward the end of last year. Mr. De Sarno's debut runway collection will be presented at Milan Women's Fashion Week in September.


Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby


(END) Dow Jones Newswires

02-15-23 0252ET