Kering generated 9.9 billion euros ($10.11 billion) in revenue during the first six months of the year, up 16 percent compared to the first half of 2021, and touted 4.97 billion euros ($5.03 billion) in sales during the second quarter, alone, up by 12 percent compared to the same three months last year, topping analyst expectations of 4.44 billion euros for the quarter that ended on June 30. Helping to drive what the luxury goods group called “sharply higher sales in the first half” was Saint Laurent, which boasted sales of 1.48 billion euros ($1.51 billion), up 34 percent on a comparable basis. Saint Laurent beat out Gucci in terms of H1 growth, with Kering’s biggest brand delivering an increase of just 8 percent for total sales of 5.17 billion euros ($5.28 billion).
Diving into the results of its individual brands, Kering revealed that Gucci – the single largest revenue-generator for the group – suffered from a “China drag” during Q2 with sales growth of just 4 percent, which offset the strength of sales in other regions, namely, Western Europe, Japan, and North America. Nonetheless, Kering reported that its “brand elevation” strategy for Gucci is ongoing, and its “reorganization of the brand’s distribution over the last two years is now almost complete.” The “very substantial reduction” in the proportion of revenue coming from the wholesale business means that sales from directly operated stores made up 91 percent of Gucci’s total sales in the first half of 2022. (Gucci is the first Kering name to embark on this drastic wholesale “streamlining.”)
At the same time, Kering states that “efforts to enhance Gucci’s offering and pricing structure went hand-in-hand with the almost-completed streamlining of its distribution and subtle changes in the brand’s creative and aesthetic proposition,” with the aim being to “elevate the brand and make it more exclusive.” And additionally, Gucci “continued to allocate greater resources to communications and marketing efforts in the first half of 2022,” following from efforts made in the second half of 2021, “when its communications expenditure moved broadly into line with normative industry levels.”
As for individual product categories, Gucci’s leather goods sales – which counted for 52 percent of its revenue for H1 – were “buoyed by successful product launches and investments in improving the range of luggage and travel bags,” per Kering. “The deterioration in the Chinese market in the second quarter partly depressed handbag sales, [but] they remained solid in other regions.” The brand’s other product categories – including shoes (21 percent of H1 revenue) and ready-to-wear (15 percent of h1 revenue) – saw “very robust sales growth compared to 2021.”
In the first half of 2022, Gucci’s recurring operating income totaled 1.89 billion euros, with recurring operating margin coming in at a “solid” 36.5 percent.
Rising star Saint Laurent “hit new highs,” according to Kering, with growth being “particularly strong in the directly operated retail network (revenue up 35 percent on a comparable basis in Q2) due to the success of all product categories,” including leather goods (which drove 72 percent of H1 sales) and ready-to-wear (11 percent of H1 sales), which rose “very sharply, continuing trends seen throughout 2021.” (Sales in all product categories were up by “over 30 percent” in Q2.)
While the brand’s growth “slowed slightly” from 37 percent in the first quarter to 31 percent in the second, “the slowdown resulted from lower business levels in China, although the brand is less exposed to that market than the Group’s other brands.” In the first half of the year, the brand “achieved year-on-year revenue growth across all major regions, although performance in Asia-Pacific was held back by China’s anti-COVID-19 measures.” Elsewhere, sales in Western Europe “more than doubled” in Q2. There was “further growth” in North America. And while sales growth in the APAC region was “nearly flat,” sales in Q2 were “excellent” in Japan.
Still yet, Keirng reported that Saint Laurent’s recurring operating income was 438 million euros in the first half of 2022, and its recurring operating margin was 29.6 percent, “a first-half record level,” up 3.3 points compared to the year-earlier period.
Kering also breaks out figures for Bottega Veneta, which generated 834 million euros for the first half, up 13 percent on a comparable basis, and 438 million euros in Q2, up 10 percent on a comparable basis. (75 percent of H1 revenue came from the brand’s leather goods offerings, followed by shoes (14 percent) and ready-to-wear (9 percent.) “Sales from the directly operated retail network were up 19 percent year-on-year,” according to Kering, while wholesale revenue was down 4 percent, “in line with Bottega Veneta’s strategy to streamline its wholesale distribution.” The brand’s recurring operating income for the first half of 2022 totaled 168 million euros, and its recurring operating margin “rose markedly” to return to the 20 percent level.
Another interesting takeaway when it comes to Bottega Veneta, which Kering says is in the midst of “building long-term value, (and Gucci) Kering opened its conference call presentation document with an image of a Bottega store front, which appears to be the latest in a string of subtle efforts by the group to position its growing, non-Gucci brands in the minds of analysts as growth for its biggest brand eases. The group did the same thing in its full year 2021 presentation.
As for Kering’s “Other Houses,” namely, Balenciaga and Alexander McQueen, they “continued to achieve very strong growth,” with revenue close to 2 billion euros in the first half of 2022, up 29 percent on a comparable basis. The Other Houses “contributed significantly to the increase in the Group’s recurring operating income,” per Kering, generating “record recurring operating income of 337 million euros in the first half of 2022, an increase of 71 percent.” Recurring operating margin was strong at 17.3 percent, an increase of 4.0 points.
Kering name-checked Balenciaga, in particular, as “achieving higher penetration in Leather Goods” for the first half of the year, McQueen as “delivering double digit growth across channels and categories,” and Brioni confirming a “sharp rebound.”