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Kering posts robust FY16 boosted by Gucci and Saint Laurent

By Prachi Singh

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Business

Consolidated revenue in 2016 of 12,385 million euros (13,180 million dollars) was up 6.9 percent as reported, 8.1 percent on a comparable basis at Kering. Luxury activities revenues increased 7.7 percent reported and 7.8 percent on a comparable basis, while revenues of sport & lifestyle activities were up 5.5 percent reported and 9 percent on a comparable basis. Recurring operating income increased 14.5 percent to 1,886 million euros. The company has recommended dividend of 4.60 euros (4.90 dollars) per share.

"In a sector undergoing far-reaching transformation, our foresight and the quality of execution of our strategy enabled us to outperform our peers and deliver outstanding operating and financial performances. In 2017, in an uncertain macroeconomic and geopolitical environment, we will keep concentrating on the organic growth of our houses and on value creation, so as to intensify our current momentum," said François-Henri Pinault, Chairman and CEO, Kering in a statement.

Kering reports strongest year-on-year revenue growth

The company said, growth accelerated sharply in the second half, coming in at 10.5 percent on a comparable basis and continuing the strong momentum that started in the first six months, which saw a 5.5 percent comparable increase.

Western Europe and the Asia-Pacific region (excluding Japan) posted double-digit revenue increases on a comparable basis, whereas growth was more moderate in North America and even Japan. Revenue generated outside the eurozone accounted for 78 percent of the consolidated total in 2016.

While Yves Saint Laurent and Gucci posted exceptional comparable growth of 25.5 percent and 12.7 percent, respectively, Kering said its fourth quarter revenue rose 11.3 percent comparable with companrable revenues at Gucci up 21.4 percent and robust 10.4 percent comparable growth at Puma. Online sales were also a significant growth driver, advancing by more than 20 percent year on year.

Net income, Group share advanced 16.9 percent to 814 million euros (866 million dollars). Net income from continuing operations (excluding non-recurring items) came to 1,282 million euros (1,364 million dollars). Consolidated EBITDA rose 12.7 percent to 2,318 million euros (2,466 million dollars) while the EBITDA margin widened by 0.9 of a percentage point to 18.7 percent. Earnings per share amounted to 6.46 euros (6.88 dollars) in 2016, while earnings per share from continuing operations totalled 6.55 euros (6.97 dollars).

Robust sales performance at Gucci

The company said, leather goods, ready-to-wear and shoes all registered solid revenue increases. Sales in directly operated stores of Gucci rose 14.8 percent – with all geographic regions except Japan achieving growth of 10 percent or above. Online sales jumped 19 percent, and wholesale sales were up 5.7 percent year on year. The growth trajectory experienced by Gucci in the third quarter of 2016 continued into the fourth quarter, with revenue rising by a sharp 21.4 percent.

Gucci sales at directly operated stores climbed 28.2 percent in the fourth quarter, with all regions delivering good showings. All of the brand's main product categories helped to propel the faster pace of revenue growth, especially handbags (both permanent and new lines) and shoes and ready-to-wear (women's and men's collections), despite Gucci’s decision to terminate markdowns in stores.

Bottega Veneta revenue declined 8.7 percent as reported or 9.4 percent on a comparable basis in 2016, which the company said were weighed down once again by low tourist numbers. Sales in directly operated stores rose in Mainland China and South Korea but the shift in demand to the Asia-Pacific region did not fully offset the lower amount of purchases made by Chinese tourists. The slowdown in sales in directly operated stores was particularly marked in Western Europe, although there was an improvement in the last quarter of the year. Wholesale sales also retreated year on year.

Yves Saint Laurent’s annual revenue rose 25.3 percent as reported, or 25.5 percent on a comparable basis, in 2016. Yves Saint Laurent registered comparable growth of over 20 percent for the sixth year in a row. Sales in directly operated stores advanced by 32.4 percent, with all geographic regions and product categories reporting double-digit growth. Sales growth continued in the fourth quarter of 2016 with revenue rising 20.5 percent year on year. Directly operated stores posted sales rise of 32.6 percent, fuelled by growth in Western Europe, Asia-Pacific and North America, which posted increases of 42.7 percent, 37.8 percent and 30.3 percent, respectively.

Other luxury brands saw a stable performances for the year as a with revenues amounting to 1,698 million euros (1,806 million dollars), down 0.6 percent on the previous year as reported. On a comparable basis, however, revenue inched back 0.3 percent. The Couture & Leather Goods brands posted satisfactory revenue growth of 4.2 percent, with positive momentum from Balenciaga, Alexander McQueen and Stella McCartney.

Sports & lifestyles revenues up 5.5 percent

Kering's sport & lifestyle activities generated revenue of 3,884 million euros (4,133 million dollars) in 2016, up 5.5 percent as reported or 9 percent on a comparable basis. Puma cemented its successful repositioning and confirmed its growth trajectory, with sales up 10.4 percent on a comparable basis.

The brand recorded very good performances across all of its geographic regions, both for shoes – its leading product category, which posted a 12.7 percent sales increase – and for apparel, up 9.6 percent. In the fourth quarter, Puma registered 9.8 percent revenue growth, with the footwear category sales up 17.7 percent and a 67.5 percent surge in online sales. Volcom's sales increased in directly operated stores, but its overall revenue was once again held back by a persistently difficult operating environment for US wholesalers.

Proposes dividend of 4.60 euros

The Board of Directors will ask the Annual General Meeting of shareholders to be held to approve the financial statements for the year ended December 31, 2016 to approve a 4.60 euros (4.89 dollars) per-share cash dividend for 2016.

As in 2016, the company said it luxury activities in 2017 will focus on achieving same-store revenue growth, while the expansion of the store network will be targeted and selective, as well as on extending work currently underway to durably strengthen operating margins. In the Group's sport & lifestyle activities, Puma expects to deliver another year of market improvement in revenue and recurring operating margin.

Picture:Gucci

Kering