French Open Cloud Group Estimates The Loss Of The Epidemic: Comparable Sales In The First Quarter Will Fall By 15%

A few days ago, the French luxury giant Kering (Kai Yun group) announced the preliminary results of the impact of the epidemic on group performance.

In March 20th, the opening of luxury brands such as Gucci (Gucci), Saint Laurent (Saint Laurent), Bottega Veneta (Balenciaga) and Balenciaga (Paris family) is expected to decline by 15% over the first quarter of fiscal year 2020 in March 31st.

Kai Yun further pointed out that the first quarter's total sales decline is expected to be between 13 and 14%. In the first quarter of fiscal year 2019, the performance of Open Cloud business was excellent: sales increased by 21.9% to 3 billion 785 million euros compared with the same period last year, representing an increase of 17.5% over the same period last year.

According to these data, sales in the first quarter of fiscal year 2020 were about 3 billion 200 million euros, representing a decrease of 550 million euros compared with the same period last year.

According to Kai Yun, the Chinese market was initially affected, followed by the Asian market, but with the spread of the epidemic around the world, most of the group's market was hit.

Kai Yun said in an official statement: "at present, the group has seen encouraging signs in the Chinese mainland market, and the situation is slowing down, such as declining passenger traffic and reduced sales. By contrast, the impact of the epidemic on other Asian Pacific markets is still evident. The situation in Western Europe began to deteriorate a few weeks ago, and has recently spread to North America. "

It is expected that the negative impact of the epidemic will at least affect the whole quarter's performance and will not rule out the possibility that the impact of the epidemic on local customers and tourists will be significantly affected in the second quarter of fiscal year 2020.

In addition, Kai Yun said: "the profit margin of the first half of the fiscal year is expected to decline, but in view of the changing situation and the uncertain future trend, it is difficult to quantify the specific impact at this stage." In the first quarter of fiscal year 2019, the recurrent operating profit rate of open cloud was 29.5%, representing a 1.6 percentage point increase over the same period in the 2018 fiscal year.

Kai Yun pointed out that a preliminary action plan has been put in place to adjust the cost structure and reduce the demand for working capital. The group also said: "other measures are being considered in order to reduce the decline in the annual operating profit margin, protect the current market position of the group, and retain the potential and capability for rapid recovery in the short and medium term."

It is not hard to see in this statement that Kai Yun is preparing for more stringent policies. During the 12~20 day of March, Kai Yun temporarily closed the 6 production bases of Gucci in Tuscany, Italy (Tuscany) and Marche.

Prior to that, Gucci has encouraged employees to adopt flexible ways of working, including telecommuting and Thursday working days. According to the government's regulations, all physical shops in Italy will be closed until April 3rd. (see "ornate ambition": Gucci Italy factory will be closed for eight days; LVMH group's Italy plant will continue to operate 100%).

Kai Yun said in a statement that despite the global spread of the epidemic, it did not affect the structural drivers of the luxury sector. "The group's business model, structure, and even its financial situation and codes of conduct enable us to have confidence in the long-term growth prospects."

In the fiscal year December 31, 2019, driven by the Asia Pacific and Western European markets, cloud sales increased by 16.2% to 15 billion 884 million euros, up 13.3% from the same year, and all countries and regions achieved business growth, with a profit margin of 30.1%. (see "ornate ambition": 2019 annual report of Kai Yun group: sales exceeded 15 billion euro mark, Gucci profitability further enhanced)

Kai Yun will announce its first quarter of fiscal year 2020 after closing on April 21st.