Kering profits plunge in the first half
![Kering profits plunge in the first half Kering profits plunge in the first half](/media/images/news/wf2024259961p.jpg)
Amidst a general slowdown in demand for luxury goods and with Gucci struggling badly, Kering has seen its first half net profit halved as compared to the same period last year
“In a challenging market environment, which adds pressure on our top line and profitability, we are working assiduously to create the conditions for a return to growth. Our Houses pursue their investments to enrich their offer, intensify the impact of their communications, and reinforce the exclusivity of their distribution. We make certain that every one of these investments creates value for the long term”, commented François-Henri Pinault, Chairman and Chief Executive Officer of Kering.
First Half Results
In the first half of the current fiscal year, the luxury conglomerate’s revenue amounted to 9.0 billion euros, a decrease of 11% on both a reported and a comparable basis, as compared to the same period of 2023. This figure includes a decline of 11% year-on-year on both a reported and comparable basis in the second quarter to 4.5 billion euros, in line with the previous quarter.Kering also reported that sales from its retail network fell by 12% in the six months to June, “adversely affected by lower store traffic” in all regions except Japan, and that wholesale and other sales fell by 6%, on a comparable basis to the same months last year.
Gucci, the group’s star brand, continued to struggle, weighing on the overall results. In the first half of the year, the brand’s revenue totalled 4.1 billion euros, down by 20% as reported and 18% on a comparable basis, as compared to a similar period of 2023. In addition, sales from the directly operated retail network dropped by 20% year-on-year on a comparable basis, while wholesale revenue was down by 9% year-on-year.
The group’s other brands fared slightly better. However, they remained largely in the red. On a comparable basis to the first half of the previous year, Yves Saint Laurent’s first half revenue declined by 9% as reported and 7% on a comparable basis to 1.4 billion euros; Bottega Veneta’s first half was 836 million euros, flat as reported and up by 3% year-on-year on a comparable basis; and the Other Houses’ first half revenue declined by 7% as reported and by 6% on a comparable basis to 1.7 billion euros.
In line with the previous guidance, Kering’s operating income in the first half of the current year fell by 42% year-on-year to 1.6 billion euros, with a recurring operating margin of 17.5%, significantly lower than in the first half of 2023, due to the negative operational leverage. Finally, in the first half of this year, net profit attributable to the Group halved to 878 million euros from 1.8 billion euros.
Outlook
The French-based luxury conglomerate has issued another profit warning. “Considering the uncertainties weighing on the evolution of demand from luxury consumers in the coming months following the slowdown recorded in the first half of 2024”, Kering expects its recurring operating income in the second half of the year to be down by around 30% compared to the second half of 2023.Image Credits: mvcmagazine.com