Kering sees revenue rise – but investors displeased with Gucci sales slowdown
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Kering sees revenue rise – but investors displeased with Gucci sales slowdown

French luxury giant Kering, which counts brands like Gucci and Yves Saint Laurent among its high-end portfolio, reported earnings last week. The earnings were strong, with “every key nationalilty” (according to the group’s chief financial officer, Jean-Marc Duplaix) showing growth. But investors were quick to punish the stock for a slowdown at fashion giant Gucci. Gucci is Kering’s flagship brand, and has been responsible for much of its recent growth – despite still performing admirably in the quarter, there’s no doubt that growth there is slowing.

Kering’s share price is up 19% year to date, after investors punished the stock for Gucci’s miss

Kering July 31

Source: Yahoo Finance

Let’s be clear – Gucci isn’t exactly a lame duck. Over the quarter, the iconic brand saw sales rise by 16.3% - numbers most brands would kill for. But it doesn’t compare particularly well with the year-ago figure of 37%. Investors had speculated about a slowdown at Gucci for months, so there’s every chance they overreacted when their suspicions were confirmed. Gucci aside, Kering saw similar success at a number of its main brands. Jewellery brand Pomellato saw sales growth of 20.3%, and Yves Saint Laurent saw sales increase 16.6%.

Revenues for the quarter ending June 30 overall rose by 15.3% year on year to 7.6 billion euros. There’s no doubt that this is a positive result that beat expectations, prompting Kering chairman and CEO Francois-Henri Pinault to state that growth: “handily topped market trends, and was highly profitable. We created an additional 1.2 billion euros in revenue in the six months, and our operating margin reached a record 29.5%. Our strategy is clearly paying off.”

Disclosure

Dominion holds Kering in its Global Trends Luxury Fund.


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