Gucci, Zegna, Ferragamo report negative sales for 2009, yet are upbeat for 2010

Most of the top luxury brands reported this week their official results for the first quarter of 2010, with PPR owners of Gucci Group registering a 1,4% increase in sales for the first quarter of 2010. Group CEO Francois Pinault explained that mature industrial markets are out of the red, yet growth is sluggish. Surprinsingly good results came from the US market.  Bottega Veneta has been the best performing brand of Gucci Group with sales increasing by 9%, while Yves Saint Laurent continues to show important losses.

Ferragamo’s sales dropped by 10%, yet a return to profits is estimated for the second half of 2010. Hugo Boss also reported this week a 11% drop in its net profits for the same period. For Hugo Boss sales in Europe dropped 12%, the US increased by 5% and Asia by 4%.

The detailed results released by Zegna this week show a 72,2% decline in net profits for 2009 with an 8,4% decrease in sales. However, Zegna officials remain positive for the 2010, already registering 20% sales increase for the first three months of 2010.

The results annouced by the four major luxury brands unanimously confirm that China is their most important markeyt. Another notable development is that sales at owned retail locations are far better than in wholesale, which has been prompting many brands to speed up direct investments. This marks a worrying trend in luxury retailing, more and more luxury brands making efforts to expand with directly operated stores, therefore avoiding the higher risks of franchising and wholesale. There have been more and more examples worldwide of franchisees which find themselves in difficult financial positions due to the high exposure of their portfolio of brands, with only select brands showing positive results. This new directly operated store strategy is also implemented by major brands such as Prada, which expansion policy is nowadays dictated by the financing banks.