Kering’s Half Year Profit Slides Due to Exited Businesses

In Industry News, What's New by Jeff Prine

Lady Buckle structured top-handle bag for fall from Gucci

Lady Buckle structured top-handle bag for fall from Gucci

Paris—Kering SA, parent to Gucci, today reported a steep decline in its first half profit as its luxury and sporting goods brands face a toughening economic environment and from discontinued operations.

Kering, formerly known as PPR, posted a net profit of 173 million euros (about $228.39 million), or 1.37 euro a share, compared to 477 million euros, or 3.79 a share, in the same half last year.

Earlier this year Kering said it planned to focus its business in luxury and sporting goods sectors, and sold off its Fnac books and music retail chain. Included in today’s earnings was a loss of 388 million euros from discontinued operations.

Still, the company’s “recurring operating income advanced 2.3% to 843 million euros (about $1.1 billion) in the six months ended June 30. Analysts had predicted 824 million euros.

Total net sales rose 1.4% to 4.68 billion eurors. Total second quarter sales rose 1.6% to 2.31 billion euros (or 5.2% excluding currencies and acquisitions.)

Kering said its sport and lifestyle division, which includes Puma, is amid a transformation that will extend into next year.

Solid Performance by Directly Operated Retail

“Kering delivered a solid performance in the first half of 2013, with revenue up 4% on a comparable basis and further growth in operating margin. The Luxury Division continued to deliver robust growth, gathering momentum in the second quarter and powered by the solid performance in its directly operated stores and its mature markets,” said François-Henri Pinault, chairman/ceo.” The contraction in the Sport & Lifestyle Division’s sales is in line with our forecasts for the full year. Puma, now under the management of Björn Gulden, is continuing its transformation program.”

Revenue in Kering’s luxury division rose 5.3% in the first half to 3.08 billion euros, as sales growth crept up to 6% in the second quarter from 4.5% in the first.

By brand, Gucci, which accounts for about 57% of the luxury division’s sales, posted a 1.6% increase. Comparable sales at Gucci rose 4.1%. Bottega Veneta had a 8.4% increase in sales and Yves Saint Laurent was up 14.2%.

“The positive momentum supporting the growth of the group’s Luxury division should be extended to the second half, as each of the division’s brand targets the optimization of its distribution, notably through the selective expansion of its directly operated store network,” Kering said. “Trends recorded in the first six months of 2013 should continue in the second half. In this context, the group maintains its goal of improving its operating and financial performances in the full year.”

Analysts speculated that the showed sales in Kering’s luxury division reflected a downturn in sales, particularly in China. In addition, the shift in luxurygoods has been toward higher-end brands, the so-called “absolute luxury” which continues to rise.