Paris-Kering’s jewellery brands were the top performers in the luxury group’s latest first-half results.However, sales of its star brand Gucci have continued to falter.Kering has set its sights on another luxury brand, recently acquiring a 30 per cent stake in Valentino with an option to increase the stake to 100 per cent by 2028.Here are four key takeaways from Kering’s latest earnings report.
Kering posted subdued growth.
Kering reported second-quarter revenue of €5.06 billion ($5.57 billion), up 2 percent year-on-year.For the first half, revenues totalled €10.14 billion ($11.15 billion), also up 2 percent year-on-year.
“In the first half, we continued to invest in the desirability and exclusivity of our hotels. We maintained a high level of profitability while undertaking important initiatives for the future,” said CEO François-Henri Pinault in a statement.
Sales at the luxury group’s star brand Gucci, which has struggled in recent quarters, fell 3 per cent in the second quarter and 1 per cent in the first half.Sales at Kering’s company-operated stores, which include its e-commerce sites, rose 4 per cent on a like-for-like basis in the second quarter, driven by sales in Asia Pacific and Japan.
Growth in Western Europe was “solid” in the quarter, Kering said, while sales in North America declined.Wholesale and other revenues were down 1 percent in the second quarter.The company did not provide financial guidance for the year ahead, citing “an environment of continued economic and geopolitical uncertainty in the near term”.LVMH echoed a similar sentiment in its latest results.
Jewellery sales were a standout in the Other Houses division.
The company’s jewellery brands fall under the ‘other houses’ division, alongside Alexander McQueen and Balenciaga.Its jewellery portfolio includes Boucheron, Pomellato, DoDo and Qeelin.
Second-quarter sales for the division totalled 966 million euros (1.06 billion dollars), down 2 percent from a year earlier. For the first half of the year, sales in the category fell 5 per cent to €1.86 billion ($2.04 billion).
Its jewellery houses, however, “maintained their strong growth trajectory, each delivering double-digit growth”, Kering said.Boucheron “led the way”, Kering said, adding that sales growth at Pomellato and DoDo was “extremely robust”.”Qeelin benefited from the recovery of the Chinese market but was held back by the slowdown in South Korea, given the very high comparative base,” the company said.
On an earnings call on Thursday afternoon, deputy CEO Jean-Marc Duplaix said Kering was “extremely pleased” with the continued growth of its jewellery brands.”Our jewellery houses posted strong double-digit growth in both channels, reflecting the appeal of their creations and the investments we have made to increase their visibility,” he said.Duplaix was previously chief financial officer, a role that will be taken over on 1 September by Armelle Poulou, former director of corporate finance, treasury and insurance, the company said on Friday morning.
Total sales in Kering’s directly operated retail network rose 9 percent on a like-for-like basis in the second quarter and 8 percent in the first half.Wholesale sales fell 27 percent in the first half of the year due to the streamlining of its wholesale distribution. Kering also attributed the decline to the “mixed American market”.
Sales in North America declined at a double-digit rate.
Kering’s sales in North America fell 23 percent in the second quarter compared to the same period last year.After several quarters of strong growth until mid-2022, North America is the region where business levels are suffering most from weaker demand from the most discerning clients and from American tourists shifting their purchases to other regions where they can buy at lower prices,” Kering said.
North America was Kering’s third-largest market in terms of sales in the first half, accounting for 22 per cent of total sales, down from 27 per cent in Q2.Japan saw the strongest growth in the second quarter, with sales up 26 percent, followed by Asia-Pacific at 22 percent and the rest of the world at 5 percent. In Western Europe, sales grew 4 percent compared to the prior year.Kering operated 1,694 stores at the end of the first half, with a net addition of 35 stores in the quarter.
Kering now has a stake in another luxury brand.
Following the release of its financial results, Kering announced that it had acquired a stake in Italian luxury brand Valentino.Kering and Qatar-based investment fund Mayhoola signed an agreement giving Kering a 30 percent stake in Valentino for €1.7 billion.
Founded in Rome in 1960 by Valentino Garavani, Valentino is one of Italy’s best-known luxury brands. Valentino currently has 211 company-owned stores in more than 25 countries and is expected to generate sales of €1.4 billion ($1.5 billion) in 2022.
The agreement includes an option for Kering to acquire 100 percent of Valentino’s share capital no later than 2028.
The transaction, which is expected to close by the end of the year, is part of a strategic partnership between the two companies, Kering said, which could lead to Mayhoola becoming a Kering shareholder.
“I have been impressed by the development of Valentino under Mayhoola’s ownership and I am delighted that Mayhoola has chosen Kering as its partner for the development of Valentino, a unique Italian house synonymous with beauty and elegance,” said Kering’s Arnault.
Rachid Mohamed Rachid, CEO of Mayhoola and Chairman of Valentino, added: “Valentino is one of the ultimate authorities on Italian luxury and we are delighted to welcome Kering as a strategic partner for the future development of the Maison de Couture.
