Sales surge at Gucci leads to Kering doubling its profits

The French luxury and sportswear group that owns Gucci and Yves Saint Laurent has more than doubled its net profits.

Kering Group has reported revenues of €15.5 billion in 2017, up 27.2 per cent on a like-for-like basis, while net profit leapt to €1.78 billion from €814 million the year before.

Kering is chaired by the billionaire François-Henri Pinault, whose family vehicle Artemis owns about 41 per cent of the company. He said Kering had delivered a “phenomenal year”: “We created over €3 billion in additional revenues in a single year, and generated more than a billion in additional earnings before interest and taxes. Gucci, whose performance was nothing short of spectacular, is amplifying its desirability across all markets.”

Gucci’s sales broke the €6 billion barrier for the first time, after a 44.6 per cent rise last year. Gucci accounts for more than a third of Kering’s total sales and Mr Pinault, who is married to Salma Hayek, the actress, said: “The potential of Gucci might be the same potential as Louis Vuitton, yes, over time. Why not?”

Louis Vuitton, the largest luxury brand in the world, is owned by LVMH, a rival group chaired by Bernard Arnault who tried to buy Gucci about 20 years ago, but lost out to Kering, then called PPR. Gucci’s recent surge has been propelled by demand from a wide range of customers buying its shoes, bags and small leather goods as well as ready-to-wear.

Kering’s performance was also boosted by a healthy 25 per cent uplift in sales at Yves Saint Laurent. Overall, the luxury division, which includes brands such as Alexander McQueen, Stella McCartney and Balenciaga, generated more than €10 billion in sales for the first time. Kering’s overall operating profit rose by 56.3 per cent to €2.95 billion.

In a move cementing its evolution into a “pure play” luxury fashion house, Kering reiterated that it would distribute the bulk of its stake in Puma, the German sportswear brand, to shareholders and retain a 15.7 per cent position. The aim of spinning off most of its Puma stake is to free the group to better focus on its high-margin brands such as Gucci and Balenciaga.

When the move to distribute Puma’s shares was announced last month, Mr Pinault said it was a “significant milestone” for the group and added: “Kering will dedicate itself entirely to the development of its luxury houses.”

Mr Pinault added: “Luxury has exploded [since 2009]. And that surprised everyone . . . today one can build a very large group in luxury without having another business line to bring a significant size.”

Analysts at Raymond James, the investment group, said the results were “outstanding” and had “once again come in ahead of expectations”.

Despite the positive results, Kering shares fell 4 per cent to €365.

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