MILAN — Kering is reshaping its logistics network in Europe and the U.S.
To improve efficiency, the French group will build a new warehouse in Trecate, near the Northern Italian town of Novara, and a new site in New Jersey.
The decision will impact around half of the 800 employees working in Cadempino, near the Swiss city of Lugano, as 400 employees will relocate to the new complex in Italy. The project is expected to be delivered over the next three years, from 2020 to 2022. Kering said on Thursday that it is “committed to working collaboratively with everyone involved to mitigate the impact on employment.”
The group attributed the decision to build a new site in Italy to its recent growth and changing business models. “Client expectations are evolving, requiring faster deliveries and a seamless experience across all channels,” the company said. “As a result, Kering is continually looking to improve the efficiency of its logistics network,” citing for example a burgeoning omnichannel distribution and lead time reduction.
The move pertains to all brands under the Kering umbrella, ranging from Gucci and Balenciaga to Alexander McQueen, Bottega Veneta and Pomellato.
As reported, Kering’s annual sales were up 26.3 percent to 13.7 billion euros. All regions contributed to the momentum at Kering’s luxury houses, which posted organic growth of 29.1 percent in 2018. In particular, in the fourth quarter, organic revenues at Gucci rose 28.1 percent after seven consecutive quarters of growth exceeding 35 percent.
In Europe, “Kering has concluded that its current logistics infrastructure in Switzerland, which is split between 20 warehouses, has become saturated and has therefore become less and less efficient.” The new warehouse in Italy will cover 1.72 million square feet.
The new location in New Jersey, “a larger and more modern building,” is also under construction.
Asked if the move from Switzerland to Italy was related to Kering’s recent tax issues, a spokesman denied any connection. “The Group strategy and organization — and in particular the geographic settlement of our subsidiaries — is strongly grounded on business and operational reasons and is not dictated by tax considerations,” he said, emphasizing that the announcement rests “purely on a business rationale.”
As reported, Kering decided earlier this month to settle with the Italian Revenue Agency through the payment of 1.25 billion euros — one of the biggest ever with the Italian authorities. The investigations of the Italian tax authorities, which focused on Kering’s tax payments related to the sales in Italy of Gucci products between 2011 and 2017, identified a tax evasion of 1.4 billion euros. According to the Italian tax authorities, in distributing Gucci products in Italy through a directly operated Switzerland-based company named Luxury Goods International, Kering had intentionally avoided the payment of taxes in Italy.
The spokesman said Kering is introducing a “new operating model involving a major reorganization and simplification of the current logistics network, requiring new investments in the U.S., Asia and Italy.”
This new logistics hub will help accommodate Kering’s future growth, leveraging “a larger storage capacity, in line with the increase in business volumes, and will meet the growing demand for connectivity with key transportation hubs. Given the quality of the assets and expertise that Kering has been building in Ticino [Switzerland], the Group will continue to capitalize on them, albeit with a substantial reduction in their activity.”
Kering’s move to Switzerland dates back to the mid-Nineties.