Gucci powers record Kering sales

Gucci drove a massive boost in luxury group Kering’s sales last year.

Group sales soared 29.4 per cent to €13.66 billion, with Gucci’s comparable sales up 36.9 per cent and Saint Laurent up 18.7 per cent. Gucci’s sales in Asia-Pacific rose by 45 per cent, Saint Laurent’s by 21.2 per cent.

Every key geographic region contributed to the growth, with North America outperforming Asia in comparable-sales growth, the markets rising 37.3 per cent and 34.1 per cent respectively. Sales in Japan rose 23.7 per cent and in Western Europe by 23 per cent.

“Once again, we significantly outperformed our sector,” said Francois-Henri Pinault, Kering’s chairman and CEO, perhaps referencing the closing of the gap between Gucci and archrival Chanel. The two brands are now neck and neck, but the still trail LVMH’s Louis Vuitton label.

“In an environment that was generally favourable but grew increasingly complex, Kering generated €2.8 billion in incremental revenues and €1.3 billion in additional EBIT compared to 2017. Our healthy, balanced and profitable growth reflects skillful execution of our strategy, rigorous financial discipline, and a shared culture emphasising responsibility and commitment,” he said.

Financial director Jean-Marc Duplaix told a media briefing that Chinese spending on luxury goods was showing signs of moving from overseas locations to the mainland.

“Sales among our Chinese clientele remained very dynamic in the fourth quarter, even with a high comparative base,” he said.

Kering’s sales success is clearly being driven by its own store network, where sales rose 31 per cent and now account for 77 per cent of turnover, reaching €10 billion for the first time. Online sales soared 71.3 per cent, while wholesale sales (to third-party-run stores) rose 24.1 per cent.

The only disappointment in the latest Kering sales figures was the performance of Bottega Veneta, where turnover slipped 3.4 per cent on a comparable basis. The company expects that brand to recover once collections from new creative director Daniel Lee begin to hit shelves. His first major works will be revealed at Milan Fashion Week.

Balenciaga and Alexander McQueen powered 32.1 per cent sales growth in Kering’s “other houses”.

Recurring operating income for Kering’s Houses was 44.8 per cent higher as reported at €4.191 billion, while the recurring operating margin widened 410 basis points year-on-year to 31.6 per cent.

Kering reported a record profit of €3.71 billion, up from €1.79 billion in 2017 and representing double its 2016 figure. The company’s recurring operating margin was 28.9 per cent.  

While Kering is bullish about its performance last year, it does have a tax investigation in Italy overshadowing its results. Authorities are seeking €1.4 billion, accusing the company of avoiding tax on earnings generated by the Italian label but billed to a Swiss subsidiary. Kering says it disputes both the basis of the claim and the amount.

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