Kering completes its transformation into a pure-play luxury company by selling Volcom
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Kering completes its transformation into a pure-play luxury company by selling Volcom

French luxury giant Kering has completed its transition into a “pure-play” luxury company by selling skater brand Volcom to Authentic Brands Group (ABG). Kering, which previously offloaded other “accessible luxury” brands like Puma, has been positioning itself to leverage the highest end of high-end luxury, focussing on its big-ticket brands like Gucci and Saint Laurent. So far, it’s working out incredibly well for the company, as demand has sky-rocketed for this segment of the market.

Kering’s share price has soared by 33% so far year to date

09 04 kering

Source: Yahoo Finance

In a press release, Kering said: “Volcom has been accounted for since 2018 as discontinued operations under the requirements of IFRS 5. The disposal will not have a material impact at Group level, either in terms of net result from discontinued operations (a non-significant capital loss) or cash flow (proceeds from disposal).”

The trend towards luxury’s high-end is being driven by millennial consumers, who prefer to buy designer, drink premium, and focus on experiences. Because it’s conflated with millennial spending, it’s likely that the trend will continue. The global value of millennial wealth is about to hit $24 trillion – and by 2025, the generation will account for 40c of every dollar spent (in 2017, it already accounted for 30c of each dollar).

Last year’s financial results (which Kering chief Jean-Marc Duplaix described as “remarkable”) demonstrated how powerful this trend is becoming – particularly in China, where economic issues caused demand to dry up for the lower-end of the luxury market. Kering, like Dominion holdings LVMH and Hermes, nonetheless outperformed in the region.

Disclosure

Dominion holds Kering in its Global Trends Luxury Fund.


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