Gucci Isn’t the Only Brand Fuelling Growth at Kering

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Anna Della Russo outside Gucci | Photo: Hugo Lee

The luxury conglomerate’s growth trend continues at an impressive pace, thanks to sales increases in nearly every region and from more brands than powerhouses Gucci and Saint Laurent.

PARIS, France — French luxury group Kering delivered a forecast-beating rise in first-half operating profit on Thursday reflecting a continued revival at its biggest brand, Italy’s Gucci, and a strong showing by fashion house Yves Saint Laurent.

Kering, whose good results were further evidence of a recovery in the wider luxury sector, said its “excellent” first-half performance raised confidence in its capacity to achieve another year of sales growth and improved operating performance.

Second quarter comparable sales at Gucci, which makes over 60 percent of Kering’s profit and whose products are endorsed by celebrities such as singer Rihanna, rose 39.3 percent, beating analysts’ expectations of 32 percent growth. This compared with already spectacular growth of 48.3 percent achieved in the first quarter.

Kering’s Yves Saint Laurent posted comparable sales growth of 23.7 percent, against average expectations of 25 percent growth, while sales at Bottega Veneta rose 1.7 percent.

The company said the strong performance was made possible by growth in nearly every region including in North America, where the luxury market remains soft. At Kering’s remaining luxury goods brands — which include Stella McCartney and Alexander McQueen — combined sales were up 10 percent, with business “accelerating” at Balenciaga, which has benefited from the arrival of creative director Demna Gvasalia in October 2015, where he has received an “outstanding reception,” according to the company.

“Our multi-brand model once again demonstrated its validity,” group managing director Jean-François Palus said on Thursday. “Virtually all other houses and brands are growing — about 45 percent of incremental group revenues were not generated by Gucci.”

First-half recurring operating profit rose 57.1 percent to £1.274 billion (€1.14 billion), with operating margin at Gucci reaching a record 32 percent of sales. Analysts polled by Inquiry Financial for Reuters eyed operating profit of £1.232 billion.

It has been a good year thus far for most makers of leather goods. While hard luxury has struggled — in particular, watches, which remain challenged by the “longest downturn on record” for the category — companies whose main business is handbags and shoes are thriving, with consulting firm Bain & Company projecting that sales of personal luxury goods will increase 2 to 4 percent overall in 2017 to €254-€259 billion ($296-$302 billion at current exchange).

By Dominique Vidalon and Lauren Sherman. Courtesy Business of Fashion

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