Gucci Puts a Spring in Kering’s Step

May 9, 2016

Kering SA has a spring in its step. The luxury goods and footwear group reported a 16% jump in fourth-quarter revenue, helped by a resurgent performance at Gucci, its flagship brand.

Revenue rose to EUR3.18 billion ($3.60 billion) from EUR2.74 billion in the same period a year earlier, helped by strong demand in Western Europe and Japan.

Kering, which owns Gucci, Bottega Veneta, and Yves Saint Laurent among other brands, said that organic revenue growth, which strips out the effect of fluctuating exchange rates, rose a more modest 8%.

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Puma, Kering’s sports-shoe brand, and Yves Saint Laurent logged the highest growth during the fourth quarter.

But better-than-expected results at Gucci suggest the brand is on its way up. The Milan-based business, known for its double-G logo handbags, had fallen out of favor with fashion-conscious consumers in recent years and faced slack demand in China where a crackdown on corruption has curbed the practice of exchanging gifts.

Gucci sales rose 13% in the fourth quarter, though its organic growth was a more modest 4.8%.

“Gucci has come in with a significant number of new styles that are starting to turn heads–at the same time, it is benefiting from promotions on its former collections,” said Luca Scola, analyst at Exane BNP Paribas.

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Kering shares were 2.0% higher on the Paris bourse in early trading.

Last year, Gucci installed new brand Chief Executive Marco Bizarri who in turn hired a new creative director, Alessandro Michele. Mr. Michele’s first collections, which appeared in stores during the end of the third quarter of 2015, have garnered high praise from fashion critics and have also proved popular with consumers.

“These results come amid a more complex economic and geopolitical environment, accentuating the shifts taking place in our sector,” said Chairman and Chief Executive François-Henri Pinault. “I am confident that the work of our creative teams and the commitment of all our associates will enable us to extend our growth trajectory in 2016 and beyond.”

Yves Saint Laurent’s organic growth was 27% as the fashions of designer Hedi Slimane continue to be very popular with consumers. Puma grew 12% on an organic basis.

Kering’s full-year net profit rose 32% to EUR696 million from the EUR528.9 million the year before when losses at businesses that the company has since sold weighed on its bottomline. Pretax profit fell 25% on a 15% rise in revenue after Kering wrote down the value of goodwill at Puma and other brands as well as incurring restructuring costs at Gucci.

By Nick Kostov

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