Kering Net Profit Up 159.5% in H1 as U.S., Asia Sales Rebound

PARIS — French luxury group Kering said net profit rose 159.5 percent in the first half versus the same period last year, as revenues rebounded sharply from the lows plumbed during the coronavirus pandemic, thanks to a strong rise in retail sales in North America and the Asia Pacific region.

Organic sales at its cash cow brand Gucci, which is celebrating its centenary, continued to improve in the second quarter. Revenues totaled 2.31 billion euros, up 86.1 percent on a like-for-like basis, following a 24.6 percent rise in the first quarter.

That was above a consensus of analyst estimates, which called for a 79 percent jump in comparable sales at the maker of Jackie handbags and horsebit loafers.

By comparison, organic sales at LVMH Moët Hennessy Louis Vuitton’s key fashion and leather goods division rose 122 percent year-over-year in the second quarter, reflecting the resilience of its star brands Louis Vuitton and Dior. Compared with the same period in 2019, the division’s revenues were up 40 percent.

Reporting first-half results after the market close, Kering said group revenues in the three months to June 30 jumped 91.1 percent year-on-year to 4.16 billion euros, representing a rise of 95 percent in comparable terms.

This compared with a 21.4 percent increase in the first quarter, and was above the consensus forecast for an 83 percent sales rise. Sales were up 11.2 percent versus the same period in 2019, Kering noted.

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The group, whose brands also include Saint Laurent, Bottega Veneta and Balenciaga, posted net income of 569.3 million euros in the first half. Recurring operating profit was up 134.9 percent to 2.24 billion euros, yielding an operating margin of 27.8 percent, up from 17.7 percent in the same period last year.

Kering said recurring operating profit was almost equivalent to its level in the first half of 2019. By comparison, LVMH reported that profit from recurring operations was up 44 percent versus the same period in 2019.

“All our houses contributed to a sharp rebound in total revenue, which comfortably exceeded its 2019 level, with a remarkable acceleration in the second quarter,” François-Henri Pinault, chairman and chief executive officer of Kering, said in a statement.

“While returning to substantial profitability and leveraging the desirability of our brands, we are stepping up the pace of our investments in our houses and strategic initiatives, notably to enhance the exclusivity and control of our distribution,” he added.

Online sales accounted for 14 percent of Kering’s retail revenues in the first half of 2021, versus 13 percent in the same period a year ago.

Luca Solca, analyst at Bernstein, sees an upside for Kering shares, as the comparison basis for Gucci should ease in the second half. “Kering is trading at a significant lower multiple to LVMH, and many in the market are keen to see reasons to believe in a re-rating story,” he said in a report dated April 30.

Solca, who has a target price of 779 euros on the Kering stock, praised Gucci CEO Marco Bizzarri for beefing up the creative pipeline with a steady stream of capsule collections and collaborations that should offset the risk of consumers tiring of creative director Alessandro Michele’s designs.

The Kering results come on the heels of figures from Compagnie Financière Richemont showing sales rose 22 percent at constant exchange rates in the three months to June 30 versus the same period in 2019, driven by the strong performance of its jewelry maisons, led by Cartier and Van Cleef & Arpels.

Meanwhile, Burberry reported retail sales at constant exchange rates jumped 98 percent year-on-year in the first quarter ended June 26, fueled by continued strong growth in mainland China, South Korea and the Americas.

Hermès International is the next big luxury player scheduled to report second-quarter results, on Friday.

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