Kering Has A Soft Landing in 2019 But 2020 Remains Uncertain

    Kering wrapped up 2019 with a modest 13.3% increase in revenue, but as the spread of the coronavirus continues, 2020 remains uncertain.
    Bottega Veneta, under the new creative direction of Daniel Lee, has helped Kering consolidate the group’s second-tier brand matrix. Photo: Shutterstock
      Published   in Fashion

    Kering wrapped up 2019 with a modest 13.3% increase when compared to their monstrous 29.4% increase in 2018. Their annual growth of recurring operating income also slumped from 46.6% to 19.6%, as suggested in their 2019 full-year financial results released today.

    While faced with many uncertainties given the coronavirus outbreak, Kering Chairman and Chief Executive Officer, François-Henri Pinault, maintained a firm stance on the group’s fundamentals in the luxury industry, and added that “we are confident in our growth potential in the medium- to long-term.”

    In order to decode the French international luxury group’s performance amid complicated economic and geopolitical challenges in the past year, Jing Daily highlights three key points from Kering’s 2019 financial results.

    1. The Asia-Pacific region, excluding Japan, accounted for 34% of Kering’s sales and contributed tremendously to their total revenue (up 20.4%) despite the retail environment in Hong Kong being impacted by political disruptions in the second half of 2019.
    2. Gucci continues to be Kering’s cash cow, bringing in 78% of the luxury houses’ recurring operating income. Yet, Gucci’s growth tended to slow down quarter by quarter in 2019.
    3. The turning point of Bottega Veneta, under the new creative direction of Daniel Lee, also appeared in Q2 2019. Maintaining a strong upward trend in the second half of 2019, the brand has been expected to consolidate the group’s second-tier brand matrix, as a way of compensating for Gucci’s downturn.

    The Jing Take

    As the report indicates, Kering sustained solid organic growth even though Hong Kong, a favorite shopping destination for many Chinese consumers, continues to deal with protests. However, robust sales on the mainland made up for the loss of revenue in 2019, according to the group’s Chief Financial Officer Jean-Marc Duplaix.

    Now, add to this the ongoing coronavirus ravishing the mainland and beyond, and Kering’s prospects for 2020 seem uncertain at best. Take Gucci, it was expected to open a couple new stores in tier-2 cities like Da Lian and Wu Xi, as announced by Sergi Villar, Kering’s Global Retail Business Development & Real Estate Group Director, at the end of 2019, but construction is still on hold. Meanwhile, online shopping throughout China has been restricted due to the virus, which has hurt Kering’s luxury brand’s digital channels. Given this, Kering’s ambition of expanding its offerings in China might have to take a backseat for the first half of 2020 or longer. For right now, however, it’s anyone’s guess how 2020 will playout.

    The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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