Fashion’s Big Question: De Sole Hopes Contract Will Be Settled by Nov. 1

Gucci contract news could come in a few weeks, as the firm posted a 47 percent drop in 2nd-quarter profits along with a 1.1 percent uptick in sales.

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Gucci will shutter the Boucheron shops in both Honolulu and Milan, both opened about one year. Boucheron will reopen in Milan, but this time inside the building Gucci bought on Via Montenapoleone. The company had no further details on the timing or logistics of the move.

When asked if Gucci would consider selling Boucheron or any of its other brands, De Sole said it doesn’t have any “specific plans” for sales, but at the same time he didn’t rule out the possibility.

“You can never say never. This is business and everything is for sale,” he said.

A sale of Boucheron at some point wouldn’t shock Sagra Maceira de Rosen, an analyst with J.P. Morgan.

“I wouldn’t be surprised if at some point [Gucci management] says, ‘Let’s stick to accessories and leather goods,’” she said.

Mirroring a phenomenon experienced in the first quarter of the year, a tax benefit lifted Gucci into the black. Gucci posted a second-quarter pretax loss of $5.8 million, or 4.9 million euros, compared with a year-earlier profit of $51.5 million, or 43.9 million euros.

Although better than those of the first three months of the fiscal year, the second-quarter figures did little to bolster Gucci’s first half. As reported, Gucci barely posted a profit in the first quarter, a result considerably worse than analyst expectations.

For the six months ended July 31, Gucci’s net profit fell 69.6 percent to $27.9 million, or 23.8 million euros, while sales dropped 2.9 percent to $1.35 billion, or 1.15 billion euros.

Restructuring costs related to store closures, inventory write-downs and employee layoffs also cut into Gucci’s profitability for the second quarter. Those expenditures came to $17 million, and the largest chunk of this outlay, $12.1 million, was for Gucci’s “other operations,” an umbrella category for recent acquisitions that excludes YSL and YSL Beauté but includes brands such as Stella McCartney, Alexander McQueen, Balenciaga and Boucheron.

Those expenses led to an operating loss of $21 million for the quarter compared with a year-earlier profit of $36.9 million.

Sales at the flagship Gucci brand declined 1.4 percent to $424.9 million in the quarter. Shoes and jewelry were the only product categories seeing an increase in revenue, rising by 14.1 percent and 14.5 percent, respectively.
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