Gucci loses shine but Kering CEO ‘not worried’
Gucci could be losing its luster, after reporting fourth quarter stagnating sales growth on Friday. However, the CEO of parent-company Kering told CNBC he was unconcerned by the slowdown.
Luxury designer Gucci is Kering's flagship label, accounting for more than half of its market value. Gucci posted near-flat sales growth of 0.2 percent year-on-year for the last three months of 2013, down from 0.6 percent growth in the third quarter.
The slowing growth of Gucci hit Kering's profits, which fell dramatically to 50 million euros ($68.6 million) in 2013 from 1.05 billion euros the year before. The company's recurring operating income also dropped in 2013.
The slowdown in luxury labels has been well-documented, with many companies concerned about the slowdown in emerging markets and the changing tastes of consumers, particularly in China, where they increasingly prefer less flashy labels and more niche products.
(Read more: Logo fatigue? Chinese now want understated luxury)
However, Kering's CEO brushed aside concerns about emerging markets and said he was confident that Gucci would do well in the long-term.
"We had the effect of a lower growth of Asian markets and in particular China, but that was true for all the brands and all competitors of course," François-Henri Pinault told CNBC on Friday.
Pinault said the company planned to make the brand more exclusive by raising the sales price of Gucci products and reducing the amount of entry-price handbags on offer.
While economists ponder whether China is heading for a hard landing, Pinault was confident that Chinese economic growth would remain strong, boosting Kering's prospects.
"The potential for growth is immense in that country, and of course as that country is growing, the luxury market is growing also," he said.
However, Rahul Sharma, founder of Neev Capital, was less sanguine about Gucci's prospects.
"Gucci has been struggling for some time," he told CNBC. "What's happening in this space is that overall growth is slowing and is veering away from the big brands that have a lot of logo. People are looking for something slightly different in luxury."
Puma brand 'disastrous'
Kering's sports brands posted a 4.1 percent fall in the fourth quarter year-on-year, dragged down by the poor performance of Puma, Europe's second-largest sporting-goods maker.
(Read more: Don't bet on China's luxury spenders: Goldman)
Sharma called Puma's results "disastrous" and said the company could not compete with the dominant Nike.
"The main issue is not what is happening with them, but what is happening with Nike. Nike is so dominant. The sneaker business is about performance and innovation and Nike's machine is so much bigger than anyone else," Sharma said.
Kering shares fell 2.8 percent after reporting results.
—By CNBC's Arjun Kharpal: Follow him on Twitter