Kering continues to flourish despite faltering in Asia-Pacific, says GlobalData

Following yesterday’s release of Kering’s figures for Q1, FY2022; Darcey Jupp, apparel analyst at GlobalData, a leading data and analytics company, offers her view: “Continuing its momentum from last year, Kering has started FY2022 strong, with group sales up a staggering €1.1bn to €5.0bn in Q1 – a 27.4% increase on a reported basis. Group retail sales in its home market, Western Europe, saw a 75% year-on-year uplift on a comparable basis, mostly thanks to weak comparatives with most of the region in lockdown or heavily restricted during Q1 FY2021. Despite its strong rebound, Western European total retail sales remained 1% down on Q1 FY2019, mirroring the region’s overall slower recovery in the total apparel market. The group faced trouble in Asia-Pacific (excluding Japan) this quarter, with comparable revenue flat on last year, largely marred by lockdowns in China beginning in March and being against exceptionally strong comparatives from the year prior (Q1 FY2021: +83%). Asia-Pacific’s strong performance during the pandemic puts the region 31% ahead of Q1 FY2019 on a comparable basis, but this pales in comparison to North America, which was up 94% in the same period, as the region continued to benefit from a sustained appetite for luxury and no COVID-19 restrictions.

“After Gucci’s struggles to recover losses from the pandemic last year, another strong quarter of growth has pushed the brand up 11.4% versus Q1 FY2019 on a reported basis, fueled by the continued success of its centenary collections from Q4 FY2021, and supported by the bounce back in Western Europe. While Gucci still contributes over half of Kering’s sales, its share of total revenue continues to shrink, with this quarter down 9.2ppts versus pre-pandemic to 52.3% – its lowest point for many years. Gucci’s dampened performance in FY2021 held the group back, and its smaller brands have largely outshined Gucci throughout the pandemic, with stand-out success at Balenciaga helping push its Other Houses share of total revenue up in Q1 FY2022 by 4.4ppts to 19.6% versus Q1 FY2019.

“Kering has continued to see strong performance in online, with retail sales through the channel up 34% despite exceptionally high comparatives last year (Q1 FY2021 +108%). While its overall group online penetration for direct retail sales remains low at 15%, this is typical for luxury players, as consumers often prefer to shop instore for the full luxury experience, particularly in this quarter when the vast majority of Kering’s stores were open throughout. Sustained online growth will be crucial for Kering to buckle down on its future strategies and continue leading the luxury market with its technological innovation, with Gucci CEO Marco Bizzarri recently announcing that the metaverse will be a key part of its strategy going forward, with long-term investment in virtual worlds and digital clothing.

“At the beginning of Q1 FY2021, Kering announced it would be selling its entire stake in watchmakers Girard-Perregaux and Ulysse Nardin. While there is no suggestion that these brands were underperforming, streamlining its portfolio will allow the group to become more focused on its remaining brands, with its apparel sector evidently the most commercially successful on its books.”