French Luxury Goods Group Kering Posts Record Sales, Margins

French global luxury goods group Kering reported Wednesday record sales and margins for 2019, led by the Gucci flagship brand in Asia, but warned that the coronavirus outbreak posed a real threat and had hit sales badly in China, one of its top markets.

Chief executive Francois-Henri Pinault said the company had experienced a "large fall" in its China sales over the past 10 days as officials take severe measures to halt the spread of the virus.

But Pinault said it was still "too early to calculate the impact" of the crisis on the company as a whole.

"Based on our experience and knowing our strengths, we expect that things will get back to normal rapidly once the emergency is over and we are already working on the next steps," he said, adding that in the days before the outbreak was made official, the business was doing very well.

Pinault said earlier that 2019 had been another year of strong, profitable growth, with sales above 15 billion euros ($16.4 billion) and an operating margin above 30 percent for the first time.

Sales rose 16.2 percent from 2018 to 15.8 billion euros, in line with analyst forecasts compiled by Factset and Bloomberg.

Net profit, however, tumbled more than 37 percent to 2.3 billion euros, hit by an exceptional tax charge in Italy of 1.25 billion euros in connection with a tax fraud investigation into Gucci.

Additionally, earnings in 2018 had benefited from the sale of the Puma footwear business which generated a gain of 1.18 billion euros.

Stripping out these two exceptional items, net profit was up 15.1 percent at 3.2 billion euros.

Despite problems in Hong Kong, hit by massive pro-democracy protests, the Asia region -- excluding Japan -- continued to lead the overall business with revenue gains of more than 20 percent.

The Asia region accounted for 34 percent of total group sales even though business in Hong Kong in the fourth quarter of 2019 slumped about 50 percent because of the turmoil there.

Gucci alone chalked up sales of 9.6 billion euros.

Yves Saint Laurent had sales worth 2.0 billion euros.

Kering made no specific 2020 forecast but said that the current environment was uncertain but its fundamentals had not been undermined.

"We will remain vigilant and ready to act given the many risks we have to face, such as the recent coronavirus epidemic," group finance director Jean-Marc Duplaix said.

"In this uncertain environment, we remain very confident in the development potential of Kering over the medium- to long-term."