This Luxury Brand Has No Plan to Shift Production to US Amid Trump's Tariff Threat
Kering has “no plan” to shift luxury goods production to the United States to counter President Donald Trump’s threatened tariffs, the company’s CEO said, even as LVMH has suggested it might move some operations to the US.
“I take his threat very seriously,” Kering CEO François-Henri Pinault said Tuesday on an earnings call, as reported by Reuters. “It’s not Kering that’s threatened our European heritage, but Gucci and Yves Saint Laurent are products of the European heritage. I have no plan to change our industrial footprint.”
Kering is a French luxury goods company that owns the Gucci, Saint Laurent, and Balenciaga brands among others.
Trump said Feb. 2 that he was imposing “very, very substantial” tariffs on European Union goods in a dispute over aircraft subsidies. Trump has complained for years that the WTO does not adequately address what he considers unfair trade practices by China and the EU.
Last January, Bernard Arnault, CEO of Kering’s chief rival LVMH, floated the idea of moving some LVMH operations to the US. “If President Trump needs to defend American Moët Hennessy Luxury Goods, I’m sure that’s possible,” Arnault said.
Kering’s luxury brands are concentrated in Europe, with Italy and France as the main production countries. However, Kering also does some manufacturing in China.
Kering reported weak annual financial results on Tuesday, with comparable sales, which strips out currency swings, rising just 1.2% in the fourth quarter to 4.88 billion euros ($5.2 billion). Annual sales rose 2.3% to 19.45 billion euros.
Kering’s stock has declined over the past year, falling 18%, while LVMH has declined 13%, Reuters said.
In response to the weak results, Kering is “potentially going to review our pricing strategy,” Pinault said.
Kering is in the midst of a makeover at its flagship Gucci brand, which has been struggling in recent years after years of explosive growth. Gucci’s comparable sales fell 12% in the fourth quarter, while they were flat for the full year.
“We are not seeing Gucci sales deteriorating faster than expected,” Pinault said. “Gucci is not deteriorating faster than expected.”
Kering’s fashion division, home to Gucci, Saint Laurent, Balenciaga and Alexander McQueen, grew 1.4% in the fourth quarter on a comparable basis, while the Bottega Veneta and Bottega Wallets division grew 13.6%.
Pinault said Gucci’s performance was impacted by weak sales in mainland China, which was only partially offset by growth in Hong Kong and Taiwan.
Gucci’s products have been consistently ranked among the most targeted for counterfeiting, according to a report from the Organisation for Economic Co-operation and Development.
Kering has been wading into the tricky world of Chinese e-commerce, which Trump has repeatedly accused of stealing intellectual property from US companies.
Kering’s CEO said Tuesday that the company is “very happy” with its joint venture with JD.com.
“We’ve chosen JD because they are not a product company, they are not competing with us,” Pinault said. “We’ve had no issues with JD.”
Kering is also wading into the waters of direct sales to consumers via e-commerce, though it’s doing so “very carefully,” Pinault said.
Kering shares were down 0.4% in early trading Tuesday, and were last down 1.2% on the year.
