Kering first half of 2017 results beat estimates

French luxury group Kering delivered a forecast-beating rise in first-half operating profit on Thursday reflecting a continued revival at its biggest brand, Italy’s Gucci, and a strong showing by fashion house Yves Saint Laurent

Kering, whose good results were further evidence of a recovery in the wider luxury sector, said its “excellent” first-half performance raised confidence in its capacity to achieve another year of sales growth and improved operating performance.

Second quarter comparable sales at Gucci, which makes over 60 percent of Kering’s profit and whose products are endorsed by celebrities such as singer Rihanna, rose 39.3 percent, beating analysts’ expectations of 32 percent growth.

This compared with already spectacular growth of 48.3 percent achieved in the first quarter.

Kering’s Yves Saint Laurent posted comparable sales growth of 23.7 percent, against average expectations of 25 percent growth, while sales at Bottega Veneta rose 1.7 percent

First-half recurring operating profit rose 57.1 percent to 1.274 billion euros (1.14 billion pounds), with operating margin at Gucci reaching a record 32 percent of sales.

Analysts polled by Inquiry Financial for Reuters eyed operating profit of 1.232 billion euros

Kering’s gross margin for the first half of 2017 stood at €4,725 million, up 31.2% as reported. The Group’s recurring operating income surged 57.1% as reported to €1,274.1 million during the period. Consolidated recurring operating margin came in at 17.5%, up 330 basis points. By activity, recurring operating margin was 24.9% in Luxury and 5.3% in Sport & Lifestyle.

EBITDA totalled €1,526.0 million in the first half of 2017, up 51.0% compared with the prior-year period. The EBITDA margin rose by 310 basis points on a reported basis to 20.9% in the first half of 2017.

Net income, Group share totalled €825.8 million in the first six months of 2017, up from €464.9 million in the same period of 2016. Adjusted for non-recurring items net of tax, net income from continuing operations, Group share rose 67.4% year on year to €872.3 million. Earnings per share amounted to €6.55 in the first half of 2017, up 77.5% compared with the prior-year period.

Revenue for the first half of 2017 amounted to €7,296.2 million, up a sharp 28.2% as reported and 26.5% based on a comparable Group structure and exchange rates. This performance was driven by extremely strong sales growth in both mature and emerging markets, with comparable increases of 33.5% in Western Europe and 34.4% in Asia Pacific (32% and 28% of consolidated revenue, respectively). North America (21% of revenue) also posted a robust 20.7% increase in comparable revenue, while Japan (9% of revenue) continued on its growth trajectory, up 6.4%. Kering Eyewear contributed €162 million to consolidated revenue during the period, after eliminating intra-group sales and royalties paid to the brands.

“Thanks to the execution of our strategy, we achieved outstanding revenue growth in the first half, clearly outperforming the sector, and delivered record profits and operating margins. These remarkable performances in all regions of the world and across all of our activities underscore Kering’s ability to innovate, create value, and gain market share. Our vision of Luxury, grounded in creative audacity and in the sincerity of our brands’ values, is more relevant than ever. This excellent first half raises our confidence in the Group’s capacity to realize another year of growth and improved operating performances.” François-Henri Pinault, Chairman and Chief Executive Officer

Gucci Fall Winter 2017 ad campaign