French luxury goods group Kering posts record sales, margins

by AFP/ pic by AFP

PARIS – French global luxury goods group reported Wednesday  record sales and margins for 2019, led by the Gucci flagship brand in Asia, but cautioned that while confident on the outlook, it was keeping a close eye on several uncertainties, not least the coronavirus outbreak in China.

Chief executive Francois-Henri Pinault said 2019 had turned out to be another year of strong, profitable growth, with sales above 15 billion euros and an operating margin above 30 percent for the first time.

Sales rose 16.2 percent from 2018 to 15.8 billion euros ($17.4 billion), in line with analyst forecasts compiled by Factset and Bloomberg.

Net profit however tumbled more than 37 percent to 2.3 billion euros, hit by an exceptional tax charge in Italy of 1.25 billion euros in connection with a tax fraud investigation into Gucci.

Additionally, earnings in 2018 had benefited from the sale of the Puma footware business which generated a gain of 1.18 billion euros.

Stripping out these two exceptional items, net profit was up 15.1 percent at 3.2 billion euros.

Despite problems in Hong Kong, hit by massive pro-democracy protests, the Asia region – excluding Japan – continued to lead the overall business with revenue gains of more than 20 percent.

The Asia region accounted for 34 percent of total group sales even though business in Hong Kong in the fourth quarter of 2019 slumped about 50 percent due to the turmoil there.

Gucci alone chalked up sales of 9.6 billion euros.

The Yves Saint Laurent marque had sales worth 2.0 billion euros.

Kering made no specific 2020 forecasts but said that while the current environment was uncertain, it did not undermine its fundamentals in the luxury goods markets.

“We will remain vigilant and ready to act given the many risks we have to face, such as the recent coronavirus epidemic,” group finance director Jean-Marc Duplaix told a conference call.

“In this uncertain environment we remain very confident in the development potential of Kering over the medium- to long-term,” he added.