Kering flags possible M&A as Gucci sales boom confirms luxury return

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The logos of French luxury group Kering and fashion house Balenciaga are pictured at the headquarters of Kering in Paris, France, April 20, 2020. REUTERS/Charles Platiau

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PARIS, Feb 17 (Reuters) – Luxury group Kering (PRTP.PA) scored a bullish rating for this year despite rising inflation following the strong comeback of its star brand Gucci in late 2021, and said could make an acquisition soon to bolster its label portfolio.

The luxury industry has recovered quickly from the fallout of the coronavirus pandemic, with sales for most groups now above pre-crisis levels, and thanks to strong demand, it has room to increase further. prices in the face of rising costs.

Sales at Kering – whose brands also include Yves Saint Laurent, Bottega Veneta and Balenciaga – jumped nearly a third in the last three months of 2021 to 5.41 billion euros ($6.14 billion ), fueled by a similarly large surge at Gucci that was nearly double analysts’ average forecast of 17%.

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Gucci’s strong performance after a disappointing third quarter is a big relief for Kering – the brand accounts for 60% of its revenue and about 70% of its profit.

After cutting advertising when the pandemic hit in 2020, Kering increased its marketing spend to boost Gucci in 2021 and it paid off especially at the end of the year, with the arrival of the new Aria collection in stores. .

A broader offering and increased focus on high-end fashion and accessories – executives said Gucci’s average selling price had risen significantly – were behind the surge in revenue, U.S. growth and Chinese boosting sales.

The release in November of Ridley Scott’s film “House of Gucci”, although not directly linked to the brand, also helped to increase the visibility of his creations.

Chairman and CEO Francois-Henri Pinault said Gucci, which enjoyed meteoric growth in 2015-2019 but has since come under market scrutiny as its momentum slowed, started the new year in line with the strong trend seen at the end of 2021.

The group’s other brands also performed well. Yves Saint Laurent, its second-biggest brand, saw sales jump 47% in the fourth quarter.

Pinault gave his strongest indication yet that Kering, which had free cash flow of almost 4 billion euros in 2021 and near zero debt, could soon embark on a takeover operation .

“It is certain that acquisitions could make sense in the near future for the group,” he said.

Fueled by its reliance on Gucci, speculation has swirled that Kering may be considering major purchases to diversify its portfolio – especially as its biggest rival LVMH widened last year with its $15.8 billion purchase. dollars from the American jeweler Tiffany.

Kering chief financial officer Jean-Marc Duplaix said Gucci – which raised prices twice in 2020 and 2021 – would raise prices again in a “targeted manner” this year, and also flagged price increases for the other brands of the group.

He said that despite higher raw material and transportation costs, the group was confident it could continue to improve profitability. Rival Louis Vuitton raised prices this week to protect margins.

($1 = 0.8807 euros)

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Reporting by Mimosa Spencer and Silvia Aloisi; Editing by Kenneth Maxwell and Susan Fenton

Our standards: The Thomson Reuters Trust Principles.

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