PARIS – Kering is counting on its wealthiest customers to assist it meet up with its luxury sector peers during what’s a transitional 12 months for its star brand Gucci.

The French luxury group, which also owns brands including Balenciaga, Saint Laurent and Bottega Veneta, reported Tuesday that sales inched up by 2 percent in the primary quarter, sharply lagging its larger competitors LVMH Moët Hennessy Louis Vuitton and Hermès International.

Revenues within the three months to March 31 totaled 5.08 billion euros, representing a rise of 1 percent in comparable terms, amid a decline in revenues in North America and a gradual recovery in China. The modest sales increase got here on the heels of a 2 percent decline within the fourth quarter.

Organic sales at Gucci were up 1 percent in the primary quarter, compared with a 14 percent drop within the prior three months.

The figures were barely above a consensus of analyst estimates, which had called for a 1 percent rise in overall comparable sales to five.04 billion euros. Like-for-like sales at Gucci had been forecast to stay flat. 

“Kering’s performance in the primary quarter remained mixed, as we had anticipated,” Kering chairman and chief executive officer François-Henri Pinault said in an announcement.

“As we work to reinforce the desirability of our brands and lift their profile in key markets, we’re encouraged by the gradual improvement in activity month after month in the course of the period. A number of initiatives undertaken by all our homes to boost their appeal and exclusivity lays the foundations for sustained, profitable growth,” he added.

Key to those efforts is the continued brand elevation at Gucci, through initiatives that include the launch of Salon, everlasting and temporary spaces where high-rollers can order bespoke luggage, exotic leather goods, furniture and high jewelry, with prices starting from about 40,000 euros to three million euros.

The primary ultra-luxe Salon store opened in Los Angeles this month, complete with fresh-off-the-red-carpet gowns.

On a conference call with analysts, Kering chief financial officer Jean-Marc Duplaix said the launch was a “tremendous success,” helping to reel in well-heeled U.S. clients at the same time as aspirational customers reined back. 

“The concept of Salon, it’s like high jewelry: we all know that by way of contribution to the sales, it’s not necessarily a game changer short-term. But by way of image, by way of engagement with key clients, that are also some ambassadors for the brand, it’s absolutely key to speculate there,” he said.

Meanwhile, Gucci is counting on the opening of its “Gucci Cosmos” exhibition in Shanghai this week to bolster its image and position within the Chinese market, where the Italian brand saw an acceleration in sales in March and April but stays within the throes of a turnaround plan. 

“We’d like to strengthen the structure we have now in place in China, and the standard of the people within the stores. We’d like to proceed to raise the brand perception,” said Duplaix. 

“We’d like to boost [the] retail experience. We all know that the brand had been quite weak in comparison with some peers,” he added. “It’s a piece in progress, but we begin to see some encouraging signs across different stores.”

The Italian brand is in a change phase, having parted ways with its longtime creative director Alessandro Michele last November. His successor Sabato De Sarno, previously a designer at Valentino, is to unveil his first effort in September during Milan Fashion Week.

Consequently, Kering is “very humble” in its ambitions for 2023, Duplaix said.

“We proceed to contemplate that Gucci could see its EBIT margin flat to barely up in 2023,” he said, adding that it’s targeting mid-single-digit top-line growth for the brand, roughly according to the planned increase in operational expenditure because it continues to upgrade its store network.

“The work we’re doing at Gucci is a journey, not a race, and we don’t expect it to repay within the very short term. But we’re extremely heartened by our progress thus far, by the drive of all of the teams and by the response available in the market,” the chief said.

Prior to the discharge of the figures, Luca Solca, analyst at Bernstein, said he was confident that Kering could revive Gucci’s fortunes, following its textbook relaunch of the brand in 2015.

“Its track record in brand revivals prompts us to consider that Kering’s top management stands a high probability of successfully turning Gucci’s fate around,” he said in a report in February.

“Scale is the secret in luxury business, and Gucci is a member of the exclusive mega-brand club,” Solca added. “Once Gucci has a latest vision, it’ll have all it needs to draw attention and lure consumers back to its stores.”

Commenting on the first-quarter results, the analyst noted that it was the primary time in a 12 months that Gucci hadn’t produced a negative surprise. 

Meanwhile, the group’s other brands posted mixed results.

Comparable sales at Bottega Veneta were flat in the primary quarter, compared with a 6 percent rise within the previous three months. Kering is bolstering the brand’s retail network, and strategically managing the provision of its most desirable products, like its latest Andiamo bag. 

“We’ve a record sellout with the Andiamo bag, so it should contribute along the 12 months, and that’s the plan: to cut back the extent of inventories,” said Duplaix. Bottega Veneta is about to stage a repeat show of its fall 2023 collection in Beijing on July 20. 

Organic sales at Saint Laurent were up 8 percent, versus a 4 percent rise within the prior quarter. The brand can be reaping the outcomes of introducing products at higher price points, like its Icare maxi tote bag, which retails for $4,900.

Kering declined to comment on reports that it is about to pay a record-breaking 13 million kilos a 12 months in rent for a latest Saint Laurent store on London’s Bond Street.

Like-for-like sales at other houses were down 9 percent, following a 4 percent drop within the fourth quarter, when sales were hit by the promoting scandal at Balenciaga.

While Balenciaga powered ahead in Asia-Pacific, it stays impacted within the U.S., U.K. and Middle East. “In continental Europe, we begin to see a normalization and we’re positive again,” said Duplaix, anticipating that the brand would probably not regain its footing completely until the second half.

Kering’s jewelry brands, which include Boucheron and Qeelin, saw double-digit growth within the quarter, and menswear brand Brioni’s sales were “excellent,” underscoring the importance of top-tier customers.

Duplaix believes they might be key to future growth in North America, where the group’s retail sales declined 18 percent in the course of the first three months of the 12 months.

“Clearly there was a weakness of the demand of the more aspirational clients. We see that among the many top clients, we proceed to grow within the U.S.,” he noted. 

Consequently, it plans to rein back its brands’ exposure to outlet stores globally, at the same time as they proceed to streamline their wholesale accounts. “It’s something that might be also managed and reduced going forward,” Duplaix said.

Kering is the last of France’s three biggest luxury groups to report first-quarter results.

Earlier this month, LVMH said revenues rose 17 percent within the three months to March 31 to 21.04 billion euros, a rise of 17 percent at constant exchange rates. Its fashion and leather goods businesses posted an 18 percent rise in organic revenues.

Hermès reported sales gained 22 percent in the course of the quarter, despite upping the value tags a median of seven percent — as high as 10 percent in some regions. Revenues rose 23 percent on a like-for-like basis.