Chez Kering: It’s all about Gucci
It’s all about Gucci at Kering these days, as the French-controlled conglomerate posted a brilliant set of first half results Thursday night, the majority of the good news very much due to the Florentine marque.
“I don’t think there are many organizations of our size that could increase revenues by over a billion euros on platform that has not expanded very much,” argued Kering’s Group Managing Director Jean-François Palus. “The spectacular performance of Gucci is unparalleled in our industry.”
Palus was keen to stress revenue growth from outside of Gucci in an invitation-only call to analysts on Thursday night. The executive carefully added, that “in the medium-term” Kering has no plans for any new acquisitions, and would concentrate on getting the full potential out of existing assets.
Kering, a quoted company which is controlled by the billionaire France’s Pinault family, scored a 28.2% increase in group revenues to €7.296 billion. While Gucci saw revenues soar by 45% to €2.832 billion led by rises across the board in retail and wholesale; age groups and international regions.
However, if one does the maths, one discovers that 76% of the increase in Kering luxury revenues came from Gucci, as consumers worldwide surged into its stores to snap up the latest ideas from designer Alessandro Michele, who took charge over the creative direction of the house only in January 2015.
Gucci is busy refurnishing its store network with 109 revamped under Michele’s direction so far, and another 40 due to be updated by the end of year.
Gucci has also inked a deal to guarantee 90-minute deliveries in major cities with etailer Farfetch; has new opened a new mainland China ecommerce site; and has seen online sales advance 52% in the first half. So, more growth is very much in the pipeline.
“It’s a 360 approach,” said Palus with a smile in his voice.
Kering, which describes itself as a luxury and lifestyle group, owns 15 global brands, including a stable of noted fashion houses including Yves Saint Laurent, Alexander McQueen, Bottega Veneta and Stella McCartney; along with German active sports powerhouse Puma. Kering can also be particularly pleased about the performance of Saint Laurent, which posted a 29.7% increase in revenues to €711 million, as newly-installed designer Anthony Vaccarello fascinated consumers with his dark and glamorous style.
The only dark cloud on the horizons was Bottega Veneta, which crept up total sales by 3.4% to €590 million. While menswear label Brioni – which fired its previous designer Justin O’Shea after just one season - remains a problem child, though Palus did insist there had been “progress in formal wear and bespoke” thanks to new creative director Nina-Maria Nitsche.
Turning to other brands, Balenciaga enjoyed an “outstanding reception to the collections from its new creative director Demna Gvasalia; while both McCartney and McQueen, “had a good level of profitability,” said CFO Jean-Marc Duplaix.
Among the other good news, Kering almost doubled its free cash flow to nearly one billion euros, in another impressive achievement. Western Europe drove the increase in overall turnover with a 42% rise - led by locals and tourists, notably in Italy, France and UK. In North America, retail rose 22% thanks essentially to residents; while in Asia Pacific sales grew by up 31%, with everywhere up except Taiwan.
Finally, the one other great pieces of news for shareholders is the performance of Kering Eyewear, which Palus called “a prime example of our ability as a group to harness organic growth.”
First launched in 2014, Kering Eyewear now boasts revenues of 209 million euros, while a recent deal with Richemont means that it can expand outside of the group’s own brands.
“We have the critical mass needed to internalize our eyewear activates and further expand with Richemont. It gives us the ability to build this as a core category. Glasses have now acquired a strong presence in our runway shows, ads and stores. And, it has managed to maintain its start-up spirit – something we nourish throughout Kering,” thrilled Palus.
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