Gucci owner Kering presents a strong recovery in the luxury sector

French luxury group Kering has accelerated sales of its Gucci brand, showing how the sector is thriving despite the Covid-19 pandemic.

The long-awaited return of the Italian fashion house has allowed the group to exceed analysts’ expectations for annual sales and operating profit and to propose a record dividend of €12 per share for 2021, against €8 per share. share in 2020.

The luxury sector shrugged off the economic shock of the pandemic with affluent consumers in the United States and China, its two biggest markets, barely slowing their purchases of handbags, jewelry and clothing.

Bigger brands have taken market share from smaller independent rivals after spending more on marketing and bolstering their once dormant e-commerce operations.

Kering’s annual net profit is in line with expectations at 3.2 billion euros. Annual revenue was 17.6 billion euros, an increase of 35% on a comparable basis compared to the pandemic low of 2020 and 13% compared to 2019 before the crisis.

That’s only marginally worse than the strong recovery at industry leader LVMH, where organic revenue growth was 36% last year compared to 2020 and 14% higher than 2019.

The picture is less favorable, however, when Kering compares itself to the fashion and leather goods division of LVMH, which houses its flagship brands Louis Vuitton and Dior. Sales for the LVMH unit reached nearly 31 billion euros last year, a comparable growth of 42% compared to 2019. This compares to Gucci’s 2021 sales of 9.7 billion euros, i.e. 10% more on a like-for-like basis compared to 2019.

“We’re not where we want to be yet but we’re definitely heading in the right direction,” said Kering chief executive Francois-Henri Pinault, adding that the group was “very confident” that it would “extend the rebound “started last year. .

Kering’s results could give a boost to the group controlled by the billionaire Pinault family and help it narrow the valuation gap that has opened up with its competitors.

The group’s shares rose nearly 6% in morning trading in Paris. They have gained over 27% over the past 12 months.

Prior to the earnings release, Kering shares had risen about 18% since the pandemic hit in early 2020, compared with a 71% rise for LVMH and a 114% rise for Hermès. The shares also traded at around 22 times the forward price-to-earnings ratio, a discount of around one-fifth for LVMH and two-thirds for Hermès.

“Gucci is on the right track,” Citi analyst Thomas Chauvet said in a note. “While it is too early to conclude on the success of Gucci’s ‘new chapter’ of growth (the next two to three quarters will be key), the retail growth gap between Gucci and its best-performing peers has shrunk.”

Investors have worried about the performance of Gucci, which accounts for more than half of the group’s sales and the majority of profits, as its growth has slowed after years of strong gains driven by creative director Alessandro Michele’s popular designs.

“It’s a small beat at Gucci and Saint Laurent and margins are in line,” Jefferies analyst Flavio Cereda said. “These are not bad numbers at all but the gap with the industry leaders is still there.”