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Gucci continues strong, Kering accelerates growth in Q4

February 12, 2020: Gucci, an Italian luxury product, continued to perform strongly in the fourth quarter, impacting parent company Kering SA (KER.PA) Kering Group to record better-than-expected quarterly performance.

In the fourth quarter, Gucci recorded a 10.5% double-digit comparable growth, which was similar to 10.7% in the third quarter, far exceeding the market’s expected 8.8%. The stronger performance of Yves Saint Laurent and Balenciaga impacted the Group’s comparable performance in the fourth quarter. Revenue recorded an increase of 11.4%, exceeding market expectations of 10.9%.

François-Henri Pinault, Chairman and CEO of the Group, commented on the results, saying that Kering Group has once again achieved sustained profitable growth in 2019, and its revenue has increased significantly, exceeding 15 billion euros for the first time. The operating profit margin of continuing operations exceeded 30% for the first time.

Commenting on the impact of the new coronavirus, he said that the uncertainty will not make the company’s fundamentals in the luxury goods field questionable, but acknowledged that half of the stores in the Chinese mainland market have been closed, mainly because of the closure of the mall, and the stores are still open. Time has shrunk sharply, from 10am to 10am to 11am to 7am. At the same time, passenger traffic and sales have fallen sharply, while e-commerce channels will not substantially make up for losses, and logistics is leased. The Macau market stores were all closed, while the Hong Kong market stores were shortened.

In response to the epidemic, he said that he has postponed all expenses such as store renovations, new store openings, advertising and activities, while relocating inventory and relocating Chinese inventory to other markets. François-Henri Pinault said that due to the strengthening of the logistics and warehousing system, the approach of all products to China at the beginning of the season was changed to gradually supplemented in the middle of the season, which has facilitated the current deployment.

According to François-Henri Pinault, the company has always had a budget B plan to deal with the economic downturn, and now it can implement plan B immediately, which is more convenient because most APs investments are made online. At the performance meeting, François-Henri Pinault said that China’s marketing expenditure will increase in the second half of the year. Once the epidemic is contained or ended, it is believed that consumption will rebound. He also praised that the Chinese mainland market grew by more than 30% in the fourth quarter, partly benefiting from the downturn in the Hong Kong market to allow consumption to return. In the fourth quarter, Chinese consumers accounted for 55% of domestic purchases and 45% overseas.

In 2019, Kering Group recorded a 16.2% increase in revenue from 13.6652 billion euros to 15.8353 billion euros, a comparable increase of 13.3%. During the period, Gucci posted a comparable increase of 13.3%, with actual revenue approaching the € 10 billion mark, an increase of 16.2% to € 8.2284 billion from 2018’s € 8.2849 billion.

The fully driven performance with the group shows the significance of Gucci to Kering. The Italian brand, which accounts for 60.6% of the Group’s revenue, contributes more to Kering’s profit. In 2019, Gucci’s continuing operating business operating profit rose by 19.8%, from 3.295 billion The euro increased to 3.946 billion euros, accounting for 82.2% of the group’s 4.7873 billion euros.

During the reporting period, Gucci’s operating profit margin of 41.0% continued to push the profitability of the luxury industry brands to the limit, and stimulated the Group’s continuing profit margin of 30.1% to rise 120 basis points year-on-year, adjusted After the increase of 90 basis points. In 2019, the Group’s EBITDA profit margin was 37.9%, a year-on-year increase of 540 basis points, and an adjusted increase of 60 basis points.

Gucci ’s Asia-Pacific market led by 22% comparable growth for the year, with 14% comparable growth in the fourth quarter tied for first place with Western Europe; Japan ’s market in the fourth quarter was affected by an increase in consumption tax, with comparable sales falling by 5% and increasing by 6% throughout the year; Western Europe The market has a comparable growth rate of 13% throughout the year, second only to the Asia-Pacific market; the North American market resumed growth in the fourth quarter and recorded a comparable growth rate of 6%, but in the first half of the downturn, it only recorded a comparable growth rate of 2% throughout the year, in line with the company’s previous plan Strategies for investing in the second half.

In 2019, Gucci’s Asia-Pacific market share has further increased to 38%, and Western Europe, North America and Japan have 28%, 20%, and 80%; leather goods still account for the absolute proportion of brands, contributing 58% of the turnover, but other Categories have significantly started to share pressure, with footwear, ready-to-wear, and jewellery watches accounting for 17%, 13%, and 4%.

According to François-Henri Pinault, 60% of Gucci stores have been refurbished into new concept stores supervised by Alessandro Michele, and the remaining stores will be completely refurbished in the next two years. He also said that Gucci’s new stores are mainly small stores, with a higher sales density. The average floor efficiency last year reached 45,000 euros per square meter, and good stores exceeded 50,000 euros per square meter.

Bottega Veneta finally regained growth in 2019, with a year-on-year comparable increase of 2.2%, and the 9.4% growth in the fourth quarter was particularly strong, but the brand is still unpopular in the Asia-Pacific market, which makes the brand currently used by Chinese consumers. The growth environment of the leading luxury goods industry is still under pressure. The 14.3% decline in the brand ’s operating profit last year also proved that it had not fully recovered. The operating profit margin plummeted by 420 basis points to 18.4%, less than half of Gucci’s ability to make money. The adjusted decline was 400 basis points lower to 17.8%.

The retail business of Vanessa ’s home, which accounts for 81%, has a comparable annual increase of 1%. Among them, the Asia-Pacific and Japan markets recorded 3% and 5% declines respectively. The Japanese market fell by 19% in the fourth quarter and the Asia-Pacific market had a comparable growth of 3%. It is also far behind the overall performance of the brand. Western Europe, North America, and wholesale business surged 20%, 19%, and 20% in the fourth quarter. Therefore, Vanessa needs to restore its momentum and needs to regain the favor of Chinese consumers and reduce the proportion of the Asia-Pacific market. In 2019, 38% of the brand’s business comes from In the Asia-Pacific market, another 15% of the share is contributed by the Japanese market, while the leather goods category, which accounts for 83%, still appears to be single.

YSL’s revenue historically exceeded 2 billion euros in 2019, a comparable increase of 14.4%, with an actual increase of 17.5% to 2.0491 billion euros; operating profit increased by 20.0% to 562 million euros; operating profit margin improved by 50 basis points to 27.4%, after adjustment Increased by 70 basis points to 27.0%.

François-Henri Pinault said that Chinese customers’ contribution to YSL is lower than other brands, which gives the brand more opportunities. At present, the brand ’s visibility in China ’s beauty products is even higher than that of ready-to-wear. The brands were added in Beijing and Shanghai last year. Flagship store, the next target is 3 billion euros.

François-Henri Pinault said that Chinese consumers contributed more than 30% of the Group’s three brands’ revenue last year, with Saint Laurent being the least, more than 20%, Vanessa’s second, more than 25%, and Gucci the most, more than 30%.

Responding to the group’s intention to acquire Moncler SpA (MONC.MI), François-Henri Pinault said that both parties appreciate each other, but “there is nothing on the negotiation table.” The above remarks echoed the answer to the same question by Remo Ruffini, CEO of Menglai, at yesterday’s group performance meeting. However, François-Henri Pinault admitted that he participated in the Versace bid last year, but eventually gave up because the price was too high.

Chief Financial Officer Jean-Marc Duplaix said Balenciaga’s revenues have far exceeded 1 billion euros, while Alexander McQueen’s sales exceed 500 million euros.

Kering Group Deputy Chief Executive Officer and General Manager Jean-François Palus said that the company ’s investment in digital media exceeded traditional media for the first time, reaching 55%, and online revenue accounted for more than 5% for the first time last year, reflecting compound growth over the past four years. The rate is over 50%.

Benefiting from the better-than-expected fourth quarter results, the three major U.S. stock indexes have successively set a new historical record. Kering SA (KER.PA) Kering Group’s stock price rose more than 6% on Wednesday, closing at a daily high of 598.00 euros, a surge of 6.27%. The historical high was only about 2%.

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