By Silvia Aloisi and Sarah White

PARIS (Reuters) – Sales at Kering’s Gucci fashion brand fell more than expected in the fourth quarter, underperforming some rivals starting to recover even as the COVID-19 pandemic keeps consumers from travelling abroad and shopping.

Gucci accounts for 60% of revenues and 80% of profits at the French conglomerate, and has been one of the industry’s top performers in recent years, making it a major focus for analysts and investors.

Despite a rebound in key luxury market Asia, which fuelled resurging sales at rivals such as LVMH’s Louis Vuitton, Gucci stumbled in late 2020, and Kering said a weak European performance had dragged on its brands.

Kering shares were down more than 7.5% in early trading.

The conglomerate said momentum should pick up in 2021, when Gucci will launch new products and collaborations to chime with its 100th anniversary.

Kering, which also owns Saint Laurent and Balenciaga, said overall revenue fell 8.2% to 4 billion euros ($4.8 billion) in October-December, down 5% on a comparable basis and missing analysts’ consensus forecast cited by UBS for growth of 1%.

Gucci’s sales were down 10.3% in the quarter on a comparable basis, when analysts had expected a 4% drop.

“To just look at 2020, quarter after quarter, is to take a short term view. We have a lot of actions to return to a path of growth, taking advantage of the recovery,” Kering’s finance chief Jean-Marc Duplaix told reporters.

Investors are keeping a close watch on the extent to which Gucci is losing steam after a hugely successful, quirky makeover under designer Alessandro Michele, which saw its revenues more than double and profits treble between 2015 and 2019.

Analysts said the earnings miss at Gucci, partly as it trims its wholesale exposure and sales via third parties such as department stores, was likely to weigh on the group’s share price and trigger some changes to bolster the brand.

“We believe Gucci management will work hard to open a successful ‘new chapter’ of growth in the coming year aimed at capturing an older, non-millennial demographic and rebalancing product/price/age mix with a slight change in aesthetics and merchandising,” said Thomas Chauvet of Citi.

DECENT START

Duplaix said trends across China and Asia as well as the United States remained supportive in the first weeks of the year for the luxury market, although Europe was tougher.

Kering can also find some comfort in the positive performance of its other, smaller brands, with Bottega Veneta in particular growing 2020 sales by nearly 5%.

The company has relied on e-commerce to reach customers, an area luxury goods group had been slow to develop but which has sped up dramatically. Online business accounted for 13% of Kering’s retail sales in 2020, up from 7% a year earlier.

Duplaix said the group was happy with how 2021 had started but gave no figures for current trading, including the key Chinese New Year holiday which this year fell in mid-February.

($1 = 0.8275 euros)

(Reporting by Silvia Aloisi and Sarah White. Editing by Devika Syamnath and Mark Potter)