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Kering shares surge as Gucci shines despite Hong Kong protests

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Kering shares surge as Gucci shines despite Hong Kong protests
A view shows an advertising poster for the new high end jewellery Gucci store on Place Vendome in Paris, France, July 2, 2019. REUTERS/Regis Duvignau/Files   -   Copyright  REGIS DUVIGNAU(Reuters)
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PARIS (Reuters) – Kering <PRTP.PA> led a luxury goods share rally on Friday after its star fashion label Gucci posted stronger-than-expected sales, demonstrating how some brands have so far managed to counter the hit from protests in Hong Kong.

Kering shares were on track for their best day in a year in early trading, with the stock up just over 8% following its sales update on Thursday evening. Moncler <MONC.MI> shares were also rising, up 6% after the Italian puffer jacket maker’s third quarter sales beat expectations.

The firms joined rivals such as LVMH’s <LVMH.PA> Louis Vuitton and Hermes <HRMS.PA> in easing fears of a major hit from months of pro-democracy demonstrations in Hong Kong that have caused them to temporarily close shops and which have kept tourists away.

“Kering’s growth is still among best-in-class this period,” analysts at Citi said in a note.

Gucci in particular managed to make up for lost business in the Chinese-ruled city with some spending shifting back to mainland China, where it has a large store network, and other Asian shopping hubs like South Korea, the company said.

But the turmoil is far from over, with protests in Hong Kong descending into clashes between demonstrators and police earlier this week, suggesting luxury brands are likely to feel the pain in the fourth quarter too.

“The trends are still negative so far in Hong Kong,” Kering’s finance chief Jean-Marc Duplaix told analysts on a conference call.

“Golden Week”, a week-long Chinese national holiday in early October which is traditionally a busy period for travel and splashing out on shopping trips, was “not at all strong” in Hong Kong, Duplaix added, with local clients also spending less.

Brands are trying to take mitigating measures, including to protect margins, with LVMH and Moncler saying they were in talks with landlords in Hong Kong to renegotiate sky-high rents on store leases.

Kering said it was redistributing stocks initially intended for sale in Hong Kong to other regions and had planned store openings in mainland China for some of its brands like Saint Laurent with a lesser presence there.

(Reporting by Sarah White; editing by Jason Neely and Kirsten Donovan)

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