A sustained appetite for luxury boosts Kering well beyond recovery, says GlobalData

Following today’s release of Kering’s figures for FY2021; Darcey Jupp, apparel analyst at GlobalData, a leading data and analytics company, offers her view: “The sustained appetite for luxury apparel has proved advantageous for Kering as it closed FY2021 up 35.2% with sales rising to €17.6bn, 13% higher than FY2019 on a comparable basis. Kering’s performance in North America was particularly strong, as its luxury houses saw an uplift of 74% on a two-year basis, driven by a quick return to normality and government stimulus payments. In contrast, performance in Kering’s home market, Western Europe, was weaker, remaining 29% down versus FY2019 after further temporary store closures during lockdowns and months of restrictions on socializing and tourism took spend away from discretionary luxury purchases. However, Kering achieved exceptional year-on-year online sales growth of 55% in FY2021, with the channel now accounting for 15% of total sales, up 2ppts from last year.

“After a troubled start to the year, Kering’s largest brand Gucci experienced a much-needed surge in sales in Q4, bolstered by the final phase of its centenary celebrations including a second collaboration with outdoor brand The North Face, pushing it 1.1% up versus FY2019 on a reported basis. However, Gucci’s slow recovery could pose a threat to Kering in the future, as it continues to significantly underperform compared to its smaller counterparts, with its share of total group revenue down 5.5ppts versus pre-pandemic, from 60.6% in FY2019 to 55.1% in FY2021.

“Saint Laurent and Bottega Venetta both performed exceptionally in FY2021, up 23.0% and 28.7% respectively versus FY2019 on a reported basis, supported by their aspirational products and a boost in wholesale revenue, which is particularly impressive considering Kering is scaling down this branch of the business to focus more on direct-to-consumer sales. A shock exit of Bottega Veneta’s star creative director Daniel Lee in Q4 threw its revival into question, but replacement Matthieu Blazy worked closely with Lee, so is well-placed to continue the brand’s resurgence.

“Kering has fared better in the supply chain crisis than many other apparel players, with its manufacturing protected by vertical integration in its European factories. However, spiraling material costs and inflation in its key markets could force the group to raise its prices like Louis Vuitton, although it made no comment on the matter in this trading update. Despite this, Kering’s FY2022 looks bright, and the group is confident it can continue to benefit from the increased appetite for luxury goods. Continuing its advocacy for sustainable fashion and technological innovation in the new year will be crucial for the group to differentiate itself from rival LVMH, which achieved even stronger results than Kering in FY2021, with gleaming results up 38.9% versus FY2019.”