PARIS — When Kering, then PPR, started shedding its retail holdings in 2006 to become a luxury-to-lifestyle conglomerate, it probably didn’t expect it to be this slow and this painful.
Still, François-Henri Pinault, Kering’s chairman and chief executive officer, considers the group “in an excellent position” for future growth, following a year of “deep-seeded transformation.”
“It’s been a hard path, but we have established a robust foundation to go ahead with our strategy,” Pinault told a press conference on Friday following the publication of the group’s 2013 results, which showed a 95.2 percent drop in net profit, heavily impacted by Kering’s ongoing reconstruction efforts. In 2013, recurring operating income fell 2.3 percent to 1.75 billion euros, or $2.32 billion.
The company, whose stable of brands includes Gucci, Bottega Veneta, Christopher Kane and Puma, is simultaneously developing on different fronts, and Pinault showed no signs of losing patience with any of them, most notably the group’s lagging cash cow Gucci, and Puma, the underperforming core of its nascent sport/lifestyle business division.
At Gucci, which accounts for more than half the group’s total business, sales slipped 5.5 percent in the fourth quarter, with a slim 0.2 percent improvement at comparable exchange rates.
The Italian brand has taken a hit during its ongoing luxury upgrade, the objective being to shift the focus to products with higher average value. According to chief financial officer Jean-Marc Duplaix, smaller tourist flows to Europe in the fourth quarter also dented Gucci’s fortunes.
Fielding questions about the brand’s slow road back to the top, Pinault said, “In the U.S., in Japan and in Europe, this strategy has already been implemented with success, which shows that tangible benefits to the sales trend are feasible.”
He added that even in China, where luxury growth has slowed in general, it was “progressing a lot.…We are working city by city to enhance our network of distribution there.”
According to Jean-François Palus, Kering’s group managing director, Gucci would open seven stores in China, close seven and refurbish seven more. “When we talk about luxury brands, you deal with a very sensitive metabolism, everything is gradual,” he cautioned. “The fiscal year doesn’t mean anything, because things happen every day and last a very long time. What we are building now is meant to last the next 20 years. You won’t feel the difference on a yearly or quarterly basis.”
Though some analysts viewed Gucci’s fourth-quarter and 2013 performance as disappointing, others saw the concerns as overblown.
“The brand has been upscaled successfully in Japan, where the no-logo handbag product reached about 70 percent in 2013. This gives us confidence regarding China. Our analysis suggests a reacceleration to 4.5 percent organic growth is achievable for Gucci in 2014,” said Helen Norris, luxury goods analyst at Barclays.
Duplaix said Kering expects “single-digit growth” for Gucci in 2014.
However, analysts, including Barclays, do not think Gucci could attain double-digit growth again. “We project 6 percent organic growth by 2015, 7 percent by 2016,” specified Norris.
Meanwhile, Saint Laurent’s revenues surged 17.8 percent last year, giving Kering’s luxury division a healthy boost. “It’s a stellar number and definitely higher than we expected,” enthused Norris.
“The transition of the artistic direction to Hedi Slimane was a huge success,” according to Pinault. “Men’s and women’s ready-to-wear were particularly well received, up 53 percent,” said the executive, while leather goods and shoes accounted for the lion’s share of revenues, 66 percent, driven by the brand’s new styles such as the Sac du Jour handbag and Paris shoes.
Kering said the new ysl.com Web site, redesigned at the end of 2012 and now serving 60 countries, fueled the brand’s e-commerce, while brick-and-mortar business, which comprises a retail network of 115 directly operated boutiques, was well balanced in geographic terms.
Revenues at Bottega Veneta rose 7.5 percent last year to surpass the billion-euro threshold. They totaled 1.02 billion euros, or $1.35 billion, led by “a solid progression” in leather goods, up 15 percent, as well as an “outstanding performance” of men’s wear, now accounting for more than 30 percent of sales.
As reported, Puma’s net loss widened to 115.2 million euros, or $156.8 million, in the three months ended Dec. 31, with the brand citing mostly a lack of a clear message and problems with distribution as negative factors.
Pinault was upbeat about the sporting and lifestyle category, saying “2014 will see an ambitious relaunch of Puma. We are very content with the new program.” He cautioned not to expect any fast results, given that Puma’s new image campaign is to be launched in August and a new package of products for spring 2015 is still down the road.
Kering warned in November that the group’s net profits would be sharply down due to one-off charges at Puma and nonrecurring impacts from discontinued operations. Exiting its last remaining retail businesses, the group suffered a net loss of 256 million euros, or $339 million, related to the disposal of shares in its books, music and electronics chain Fnac, and a net expense of 562 million euros, or $746 million, related to the catalogue retailer Redcats.
Kering is continuing the process for its planned sales of catalogue retailer La Redoute and Relais Colis.
Between 2005 and 2013, the group’s recurring operating income shifted from 66 percent retail distribution and 34 percent luxury to 89 percent luxury and 11 percent sports and lifestyle.
All dollar rates are calculated at average exchange rates for the period concerned.
In the fourth quarter, sales edged down 0.6 percent to 2.55 billion euros, or $3.47 billion, from 2.56 billion euros, or $3.32 billion, a year ago. At comparable scope and exchange rates, this represented a rise of four percent.
Pinault sidestepped questions regarding the conglomerate’s declared aim to triple its size by 2020, saying only that the group expected “growth in our revenue and recurring operating income in 2014.”
“We understand, tripling in size before the end of the decade has always been more of a vision than a target. Viewing how weak Puma is, it will be difficult to achieve,” Norris noted.
Shares in Kering closed down 2.3 percent at 151.45 euros, or $207.83, on the Paris Bourse on Friday.
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye