Feb 17, 2015
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Kering makes progress in 2014 but star Gucci misses the mark 

Feb 17, 2015

PARIS, France - Gucci owner Kering said on Tuesday that the weak euro and strong dollar were likely to boost revenue this year but could hit margins in the first half due to its currency hedging policies.

The French luxury and sports brand group said the revitalisation of Gucci under new leadership would be a priority in 2015 as the Italian brand continued to see its comparable sales decline in the fourth quarter by 0.5 percent. Kering chief executive Francois-Henri Pinault also specified that the group would not be making any acquisitions this year, choosing instead to focus on driving same-store sales at its luxury brands.

Gucci fall/winter 2015/2016 | Photo: PixelFormula - Pixel Formula

Kering said it would focus on quality of service in Gucci stores and the attraction of its ready-to-wear collections. Gucci posted a 6.7 percent drop in 2014 operating profit to 1.05 billion euros ($1.19 billion), still contributing more than 60 percent of the group total.

In December, Kering sacked Gucci's creative and management chiefs after watching its sales plummet for more than two years, particularly in Asia. It appointed as chief executive Marco Bizzarri, who had shown his mettle at

Bottega Veneta, and last month named as creative head Alessandro Michele, the right-hand man of his former boss Frida Giannini.

In contrast, Kering said revenue at Saint Laurent had doubled in three years under the creative stewardship of designer Hedi Slimane, and that the brand, which struggled for many years before, was now starting to contribute significantly to group profit.

In 2014, Saint Laurent made an operating profit of 105.1 million euros on sales of 707.3 million, which were up 27.2 percent on a comparable basis.

Kering also said a sale of Sergio Rossi was one option under consideration for the high-end shoe brand.

Sources had previously told Reuters that Sergio Rossi had been put up for sale informally for more than two years but had never found buyers.

"As of today, all options are being examined regarding Sergio Rossi assets," Kering Finance Director Jean-Marc Dupleix said on a conference call.

Kering reported group operating profit of 1.66 billion euros for 2014, slightly below the average of analyst estimates in a Thomson Reuters I/B/E/S poll of 1.69 billion euros.

"At this stage, there is not much in the quarterly update to further push Kering's share price," said Luca Solca, a luxury goods analyst at Exane BNP Paribas. "A faster-than-expected traction of the new Gucci team and the prospect of building a pure play luxury Kering down the road would be the two most important share price drivers from here."

The stock has risen 14 percent this year.

€1 = $1.14/£0.74

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