KER Kering

By Matthew Dalton

PARIS--Gucci parent Kering SA said Wednesday that the coronavirus epidemic has hit its business in China hard, forcing the company to shuffle its logistics and production as it waits for the epidemic to fade.

The outbreak interrupted a strong run in the fourth quarter and January for Kering, which also owns Saint Laurent, Bottega Veneta, Balenciaga and other brands. Sales in the quarter rose 11% to 4.36 billion euros (4.76 billion).

Kering executives said that January sales were exceptionally strong, particularly among all-important Chinese clientele. But that was before the coronavirus outbreak began to take a toll at the end of the month.

"We have a strong drop in traffic and sales in the last ten days," said Francois-Henri Pinault, the French billionaire who is the chief executive and controlling shareholder of Kering."

Half of the conglomerate's stores in mainland China are closed, he said. The ones that are open are operating on reduced hours.

Kering is changing its production schedules and inventory distribution to reflect lower demand in China.

"We are now brand-by-brand reallocating that inventory to other regions in the world so that we are not too heavy in stock in China," Mr. Pinault said.

Chinese shoppers are the industry's most important customer group, representing about 35% of total global sales, according to Bain & Company. At Kering, they account for slightly more than 30% of global revenue, executives say.

Kering said full-year sales were EUR15.88 billion, up 13% after adjusting for currency swings and other one-off impacts. Net profit for the year fell to EUR2.31 billion from EUR3.71 billion in 2018, largely due to a $1.4 billion tax settlement reached with Italian authorities.

Cristina Roca contributed to this article.

Write to Matthew Dalton at matthew.dalton@wsj.com

(END) Dow Jones Newswires

February 12, 2020 06:08 ET (11:08 GMT)

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