Gucci turnaround helps Kering profit glitter

A return to growth in its struggling Gucci brand helped French luxury and sports clothing group Kering post Friday a glittering 32-percent leap in net profits to 696 million euros ($773 million) last year.

While group operating profit dipped one percent, sales climbed 15.4 percent in nominal terms to 11.58 billion euros.

The French luxury group had been weighed down by a slowdown in sales at its flagship Gucci brand but a turnaround engineered by new creative director Alessandro Michele appears to be bearing fruit.

Gucci sales returned to growth, rising by 11.5 percent, even if operating profits were down.

“The brand’s new creative vision -– enthusiastically received by the trade press and customers alike -– coupled with the rapid roll-out of the brand’s new strategy… provided fresh impetus and drove solid, promising performances in the fourth quarter of the year,” the company said in a statement.

Gucci sales rose by five percent on a comparable basis in the final quarter of last year.

“Kering’s solid 2015 results reflect brisk sales and improved operating performances in the second half of the year,” chief executive Francois-Henri Pinault said, noting they came in more complex economic and geopolitical environment.

Overall, luxury activities saw sales rise 4.1 percent on a comparable basis and operating income edged up 2.5 percent, which the company said was primarily fuelled by strong performances by its directly owned stores in mature markets, in particular western Europe and Japan.

The Yves Saint-Laurent brand was the star performer, with sales up by a quarter on a comparable basis and operating income up by 60 percent.

The Puma brand, which dominates Kering’s sports and lifestyle activities, saw sales rise 6.8 percent on a comparable basis, even if operating profit fell by a quarter, which the company said was mostly due to unfavourable currency effects and higher marketing costs as part of brand’s repositioning.

Sales of 11.58 billion euros were slightly higher than the 11.44 billion expected by analysts surveyed by Factset financial data supplier.

The 4.6-percent rise in sales when exchange rate effects were stripped out “was the best performance by the Group in the past three years and that dynamic is reflected particularly in the fourth quarter with an eight-percent rise in sales in comparable terms”, said financial director, Jean-Marc Duplaix.

Kering’s board proposed a dividend payment of 4.00 euros per share for 2015, unchanged from the previous year.


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