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Kering group sales increased 14% in 2022
Nov
Among the brands under the Kering group, Saint Laurent has the strongest development power. Meanwhile, Gucci sales fell short of expectations.
Kering group sales increased 14% in 2022
Kering Corporation has just reported its financial results for the third quarter of 2022. Overall, overall sales increased by 14% (after adjusting for foreign exchange differences), particularly in Europe. The reason is that US customers come to Europe to shop when the US dollar is strong.
In 2022, many researchers and financial analysts specializing in luxury products believe that the market will cool down after the pandemic and as the whole world approaches the possibility of an economic recession. However, the financial results of the groups as of 3Q2022 still show steady growth, from LVMH (19%) to Hermès (24%) and now to Kering (14%).
Mainly purchasing power lies in the US customer segment, taking the opportunity of the US dollar to appreciate against the Euro, and travel to Europe to shop. According to the report of the third quarter of 2022 of the Kering Group, sales in Europe increased by 74%. Customers mainly choose items from Gucci, the flagship brand of Kering Group. But on the contrary, because of that, Gucci’s sales in North America were not as satisfactory.
Meanwhile, the Chinese market has not really recovered. Gucci, whose sales depend on this market, should also be affected.
Kering also said that although it has closed its store in Russia because of the Russia-Ukraine war since March 2022, the group still pays regular monthly salaries to employees as well as pays rent for the premises. “To protect the brand, we need to maintain a presence in this country,” said Jean-Marc Duplaix, Kering’s chief financial officer. “But we don’t think it’s possible to restart the business anytime soon.”
In both the third quarter of 2022 and the first nine months of 2022, the brand of Kering with the strongest growth is Saint Laurent. The French fashion house achieved sales of 916 million euros in the third quarter of 2022 alone, up 30% after adjusting for the difference in foreign exchange rates.
Sales increased steadily in all product segments, but the most outstanding was the Icare tote bag. The handbag has a higher price than other Saint Laurent product lines, in recent times, it has appeared with stars on the street such as Rosé Park of BLACKPINK, Angelina Jolie, or the angel Rosie Huntington-Whiteley.
The Kering Group said the next goal is to build Saint Laurent into a key brand (mega-brand) with sales reaching 5 billion euros. Currently, the brand has reached a target of 2.5 billion.
When creative director Daniel Lee left Bottega Veneta, researchers and financial analysts expressed concern for the future of the Italian brand. The youthful inspiration that Daniel Lee brings to Bottega Veneta is indisputable. In the second-hand market, only the designs made by him can maintain a positive transfer price.
However, the financial report of the 3rd quarter of 2022 of Kering group shows that Bottega Veneta is still developing well. The debut collection that new creative director Matthieu Blazy made for the brand was praised. Sales are particularly good in Europe and Japan. “Bottega Veneta has a definite roadmap and we believe the brand will be a resounding success in all markets where it operates,” said Mr. Duplaix.
Kering doesn’t specify sales for smaller brands like Balenciaga or Alexander McQueen. However, according to Luca Solca, a market researcher at Bernstein Research, these brands present a huge opportunity for the corporation.
“The ‘small’ brands at the Kering house are not really small. They bring more and more profits to the corporation,” said Mr. Solca. Specifically, this brand group represents 28% of total group sales in 2021, up from 20% in 2010, and profits tripled in the same period.
However, the biggest brand of the Kering group, Gucci, continues to “flatten” in the third quarter of 2022 in particular and the first nine months of 2022 in general. Specifically, the brand has a growth rate of only 9%, lower than Saint Laurent and Bottega Veneta.
Over-dependence on the Chinese market has hit Gucci hard over the years, as the country insists on adopting a Zero-Covid policy. However, Mr. Duplaix believes that the Chinese market will soon recover.
“We see that the Chinese market still has a great passion for luxury fashion,” he said. “There is no reason for this need to suddenly disappear overnight. Therefore, we believe that we should continue to be strong in this market.”
In 2022, the Kering group carried out internal reforms for Gucci. It is an additional position of deputy general manager – Ms. Maria Cristina Lomanto – in charge of the product segment, helping the brand return to the schedule of launching six collections per year (since the pandemic began, the brand has cut only two collections/year). The Mainland China geographic region also has a new president, Laurent Cathala, who focused on reviving sales in this market.
The Kering Group is currently facing great pressure from shareholders because of Gucci’s business situation, which is said to be far behind rivals such as Louis Vuitton, Hermès, and Chanel.
At each financial reporting session, corporations make predictions for the next period. The issue of concern is the ability to control escalating costs because of inflation, especially when Europe faces an energy crisis this winter.
“As always, we want to support our partners. So we will take inflation as part of the cost of production,” Mr. Duplaix commented. “We have the opportunity to save and also increase the price, but it will need to be discussed carefully before deciding to increase the price.” He gave an example that the Kering group did not adjust prices for foreign exchange differences in the third quarter of 2022.
Kering Group Chief Financial Officer acknowledged that the market is “quite complicated” because of the Zero-Covid policy in China and the inflation situation. “The [luxury] industry hasn’t been affected as much as other industries, but that doesn’t mean we’re completely safe. We still maintain long-term plans but will be flexible to change in the short term if necessary.
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