Kering Revenue Rises 17% Amid Luxury Segment Divergence

The Tip Desk · June 30, 2015 · 2 min read

The luxury group saw a recovery in second-quarter activity driven by strong tourist spending in Europe.

Kering reported consolidated revenue of 5,512.5 million euros for the first half of 2015, an increase of 17% in published data compared to the first half of 2014. The company said the Luxe division recorded a sales increase of 17.8% in published data and 2.8% at comparable exchange rates.

Activity in the luxury market was marked by significant performance differences between quarters. The first quarter of 2015 was penalized by a deteriorating consumption environment in Greater China, a severe winter in North America, and high comparison bases in Japan. In the second quarter, activity became more sustained due to strong growth in tourist spending in Europe, Japan, and Asia-Pacific. According to Global Blue data, tourist spending in Europe rose 37% in the second quarter, with an 80% increase for Chinese tourists.

Within the Luxe division, Yves Saint Laurent saw a comparable revenue increase of 24.3%. Gucci reported a comparable variation of -1.6% for the semester. The company said Gucci's second-quarter activity benefited from promotional actions in Asia to reduce stocks of collections prior to the arrival of Alessandro Michele as Creative Director. The first collection fully designed by Michele, the Cruise collection, is scheduled for store distribution at the end of the third quarter of 2015.

Other luxury brands saw published sales rise 21.5% to 815 million euros. This segment included the addition of Ulysse Nardin on November 1, 2014. While couture and leather goods brands grew approximately 9.1% in comparable terms, the company said watch brands experienced a decline due to an unfavorable market. These watch brands were heavily penalized by the revaluation of the Swiss franc, which contracted gross margins.

In the Sport & Lifestyle division, revenue rose 15.5% in published data to 1,731 million euros. However, the operating margin for this division fell to 2.2% due to a decline in the profitability of PUMA.

Overall current operating result for the group fell 5.4% to 773.2 million euros. The group operating margin stood at 14.0%. The company said the Luxe division operating margin declined to 21.4%, with more than half of this move resulting from combined currency and currency hedging effects, alongside a decline in profitability for Gucci and the watch brands.

Net financial debt rose to 5,337.3 million euros as of June 30, 2015. The company said this is traditionally higher at the end of the first half due to dividend payments and seasonality. Gross financial debts included 211 million euros in put options granted to minority shareholders.

Operational investments for the first half of 2015 totaled 303.0 million euros. The group maintains 4,153 million euros in confirmed credit lines.