Gucci held its Fall/Winter 14-15 runway show on Wednesday in Milan.

Kering 2013 Profit Plummets on Company Restructure

In Industry News, What's New by Jeff PrineLeave a Comment

Gucci held its Fall/Winter 14-15 runway show on Wednesday in Milan.

Gucci held its Fall/Winter 14-15 runway show on Wednesday in Milan.

Paris—When Kering, the luxurygoods conglomerate behind Gucci, Bottega Veneta, Stella McCartney etc., said last November it expected a significant profit drop for 2013 due to restructuring costs that included selling off its Fnac and Redcats division.

Today, Kering reported those dismal results: net profit slumped to 49.6 million euros (about $69 million) compared to a 1 billion euros in 2012. Weighing on the results was some 800 million euros in costs related to the sale of Fnac, a consumer electronics retailer, and Redcats, a mail order business.

Gucci Disappoints Too

Following the release of the report this morning, Kering saw its shares fall as much as 3.7%percent, wiping about 700 million euros (about $960 million) off its market value.

Operating profit from Kering’s luxury brands, which include Gucci, Balenciaga, Stella McCartney and Alexander McQueen, rose 4.4% to 1.7 billion euros, on revenues of 6.5 billion euros. That was offset by a decline at Puma, which Kering has an 84% stake in, as operating profit was down 34% to 200 million euros.

Meanwhile at Gucci, which accounts for about half of Kering total, comparable sales were up 0.2% down from 0.6% growth in the third quarter—an missing analysts’ estimate for 08% growth.

Like other major luxury brands, Gucci is facing a slowdown not only on its home turf in Europe, but also in major expanding markets such as China. In addition Gucci has been pushing toward the higher end at the same time and plans to raise prices as well as tighten distribution.

“Gucci is the key issue for the stock currently, given disruption from the repositioning in China,” Helen Norris, an analyst at Barclays.

Some of the company’s smaller brands, such as Bottega Veneta and Yves Saint Laurent gave strong performances (YSL up 42%).

According to CEO François-Henri Pinault, the weaker performance through 2013 was a consequence of strategic transformation into a “pure” apparel and accessories group. Kering changed its name last year from PPR as it moved to focus on two core brands, Gucci and Puma.

“As we had anticipated, results are lower in the sport & lifestyle division, amid major changes at Puma aimed at rebuilding the brand’s commercial momentum,” said Pinault. “With a coherent international group of strong brands enjoying considerable organic growth potential, we are well positioned to press ahead with our strategy.”

 

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