Kering posts 25 percent revenue growth in FY17

Consolidated revenue at Kering for 2017 amounted to 15,477.7 million euros (19,080.6 million dollars), up 25 percent reported and 27.2 percent based on a comparable Group structure and exchange rates. The company said, sale in Western Europe and North America were up 32.3 percent and 22.9 percent, respectively, on a comparable basis, and in emerging countries, especially Asia Pacific excluding Japan up 32.7 percent on a comparable basis. Japan also delivered 10.9 percent rise on a comparable basis. Consolidated EBITDA jumped 49.4 percent to 3,464.4 million euros (4,268 million dollars) in 2017, while the EBITDA margin widened by 3.7 percentage points to 22.4 percent. Earnings per share amounted to 14.17 euros (17.45 dollars) in 2017, up from 6.46 euros (7.96 dollars) in the prior year. Earnings per share from continuing operations totalled 14.22 euros (17.51 dollars), compared with 6.55 euros (8.06 dollars) for 2016.

Commenting on the company’s performance, François-Henri Pinault, the company’s Chairman and CEO, said in a statement: “Kering delivered a phenomenal year in 2017. We created over 3 billion euros in additional revenues in a single year, and generated more than a billion in additional EBIT. Earlier this year, we announced the completion of our transformation into a luxury pure player. Pending their approval, the distribution to our shareholders of the bulk of Kering’s stake in Puma will allow them to directly benefit from the considerable potential of this brand, which is in the early days of its growth story.”

Review of Kering’s full year results

Kering’s gross margin for 2017 amounted to 10,133 million euros (12,477.9 million dollars), up 30.1 percent on the previous year as reported. Recurring operating income was up 56.3 percent as reported to 2,948 million euros (3,630 million dollars). Consolidated recurring operating margin advanced 3.8 percentage points year on year to 19 percent. Net income, group share surged 119.5 percent to 1,785.6 million euros (2,198.4 million dollars), while net income from continuing operations excluding non-recurring items, group share came in at 2,001.9 million euros (2,464.8 million dollars), an increase of 56.2 percent year on year.

Revenue generated by Kering’s Luxury activities passed the 10 billion euros (12.3 million dollars) mark for the first time, advancing 27.5 percent as reported and 29.9 percent on a comparable basis to 10,795.8 million euros (13,292.3 million dollars), driven by 35.3 percent comparable growth in the directly operated store network and 16.7 percent comparable growth in the wholesale network. Directly operated stores – which account for over 75 percent of total sales for luxury activities – saw strong growth momentum across all regions, in both emerging countries up 32.8 percent on a comparable basis and mature markets, up 28.1 percent on a comparable basis.

Total revenue advanced 33.4 percent on a comparable basis in Asia Pacific, 32.7 percent in Western Europe, 27.1 percent in North America and 15.5 percent in Japan. Online sales for luxury activities surged by more than 70 percent. Kering’s Luxury activities reported further revenue growth in fourth-quarter 2017, with a rise of 24.6 percent as reported and 30.5 percent on a comparable basis. The directly operated store network continued on an uptrend, with sales rising 36 percent on a comparable basis over the quarter.

Gucci revenues surpass 6 billion euros

Gucci, the company said, outperformed the market, with 2017 revenue topping the 6 billion euros (7.3 billion dollars) mark for the first time, up 41.9 percent reported and 44.6 percent on a comparable basis. Sales in directly operated stores were 47 percent higher year on year, with 57.6 percent comparable sales growth in Western Europe and 43.9 percent comparable sales rise in North America. Online sales soared by more than 80 percent, while sales in the wholesale network were up 34.7 percent on a comparable basis. The rise in revenue in fourth-quarter was 42.6 percent on a comparable basis.

Bottega Veneta’s revenue amounted to 1,176.3 million euros (1,449.3 million dollars), up 0.2 percent reported and 2.4 percent on comparable data. Revenue in directly operated stores rose 4 percent, led by the rise in sales in Western Europe, up 7.3 percent on a comparable basis. Revenue in the fourth quarter was up 4.7 percent on a comparable basis, while sales in directly operated stores were up 6 percent over the period.

Revenues at Yves Saint Laurent were up 23 percent reported and 25.3 percent on a comparable basis to 1,501.4 million euros (1,850.8 million dollars). Sales in directly operated stores increased 27.3 percent on a comparable basis, propelled by revenue growth across all regions. Revenues in Western Europe were up 27.1 percent on a comparable basis, while the wholesale network posted 20.1 percent growth. Fourth-quarter sales increased 22.9 percent on a comparable basis.

Other luxury brands reported revenue rise of 12.3 percent reported and 14.1 percent on comparable data to 1,906.9 million euros (2,350.7 million dollars). All of the group’s main regions contributed to the sales uptick, with Western Europe up 17 percent on a comparable basis and Japan up 19.9 percent on a comparable basis. Sales in directly operated stores rose by 26.3 percent on a comparable basis, with all brands contributing to growth. Sales in the wholesale network climbed 7.4 percent on a comparable basis.

Couture & leather goods brands posted revenue growth of 17.8 percent on a comparable basis, lifted by a positive growth in Balenciaga. Watches & jewellery brands delivered growth of 8.7 percent on a comparable basis. Sales for other luxury brands in fourth-quarter rose 18.8 percent on a comparable basis, driven especially by Balenciaga, which was the group’s fastest-growing brand in the quarter.

Puma revenues accelerate

2017 revenue for the sport & lifestyle activities totalled 4,381.9 million euros (5,401.9 million dollars), a rise of 12.8 percent reported and 14.7 percent on a comparable basis. Sales were up in all distribution channels and in all main regions. Footwear sales were up 23.3 percent on a comparable basis and recurring operating income for sport & lifestyle activities doubled year on year, up 98.1 percent to 244 million euros (300.9 million dollars) in 2017.

Puma’s full-year revenue topped the 4 billion euros (4.9 billion dollars) mark for the first time, up 14 percent reported and 15.8 percent on a comparable basis at 4,151.7 million euros (5,116.2 million dollars). Wholesale sales – which represented 76.5 percent of the brand's total revenue – rose by 14 percent on a comparable basis. Sales in directly operated stores were up 22.9 percent. Puma continued on an uptrend in fourth-quarter 2017, with revenue advancing 14.6 percent on a comparable basis. 2017 recurring operating income for the brand almost doubled year on year, soaring 92.7 percent to 243.9 million euros (300.6 million dollars).

Kering board decides to offload stake in Puma

At its February 12, 2018 meeting, the Kering board decided to ask shareholders to approve a cash dividend of 6 euros (7.3 dollars) per share for 2017, at the annual general meeting, up 30 percent year on year. The board has also decided to ask shareholders to approve the payment of a stock dividend in the form of Puma SE shares representing 70.40 percent of Puma’s total outstanding share capital, out of the 86.25 percent owned by the group as of December 31, 2017. Upon completion of this operation, Kering would retain 15.85 percent of its shares outstanding and voting rights.

About the outlook for 2018, Kering said, the group's luxury activities will focus on achieving same-store revenue growth in 2018 while ensuring a targeted and selective expansion of their store network. In the group's sport & lifestyle activities, Puma expects to deliver another year of strong growth in revenue and recurring operating margin. The company added that if Kering’s shareholders approve the resolution to pay an exceptional dividend in the form of 70.40 percent of Puma’s total shares outstanding, the group’s exposure to this business will be automatically reduced.

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