Prada released its full-year revenue for 2021, highlighting a “very strong second half of 2021 marked by an acceleration in retail sales with a sharp increase in profitability and a strong cash flow generation.” The Italian group reported revenue of 3.36 billion euros ($3.69 billion) for the year, up 41 percent from in 2020 and up 8 percent from 2019, and profit that rose to 294 million euros ($322.52 million) compared with a net loss of 54 million euros ($59.24 million) in 2020. The Prada and Miu Miu owner pointed to a rise in full-price sales and local spending for the second half of the year, strong results across all product categories, and “outstanding” growth in online sales, which grew by 5x compared to 2019, and now generate 7 percent of the group’s total sales. 

In terms of sales by region, Asia Pacific sales amounted to 1.19 billion euros ($1.31 billion), up 29 percent compared to 2020 and 30 percent compared to 2019, with sustained demand coming from key markets throughout the period compared 2019. Sales in China, for example, were up by 56 percent compared to 2019, topped only by “Korea (up 90 percent) and Taiwan (up 61 percent),” according to Prada’s report. Meanwhile, in the Americas, where Prada’s customers are the youngest, sales saw a “sharp increase throughout the year,” reaching reached 572 million euro, up 103 percent compared to 2020 and 69 percent compared to 2019. Still yet, sales in Europe stood at 749 million euro, up 35 percent compared to 2020 and down 11 percent compared to 2019. Prada noted that “the trend turned positive in H2, up 2 percent compared to 2019,” and the EU region seeing “strong progress across all countries.” 

Reflecting on Prada’s results, Bernstein analyst Luca Solca stated in a note on Monday that the group’s marquee Prada brand “led performance with 21 percent organic growth vs. FY19 and 29 percent vs. 4Q19,” putting Prada “in line with Moncler (+30 percent) and above Burberry (-3 percent) in 4Q21.” At the same time, the group’s smaller brands, including Miu Miu (-7 percent organic growth vs. FY19) and Church’s (-41 percent organic growth vs. FY19), “have yet to recover above [pre-pandemic] 2019 levels.”  

“The Prada Group’s start to 2022 has been strong,” chief executive officer Patrizio Bertelli stated on Monday. “Our long-term strategy is on track, focused on distinctive brand identity, product quality and industrial know-how, direct distribution, and sustainability at the core of our values. Decisive actions to evolve the business and navigate the changing luxury market drove outstanding growth and increased profitability in 2021.” 

The results come as Prada has been aiming to boost annual revenue to 4.5 billion euro ($4.94 billion) for the “medium-term,” with an operating margin target of approximately 20 percent. In furtherance of this, the group stated in November that it is angling to double its online penetration to 15 percent of retail revenue and increase retail sales density by 30 percent to 40 percent. Shedding light on how it plans to achieve such growth, Prada revealed last winter that from a brand point of view, it is looking to “consolidate strong awareness by leveraging its brand pillars,” and boost its marketing investment in digital and experience in order to “sustain and convert customers focus.”

In terms of product, Prada’s management previously stated that it is “investing in iconic products and newness” simultaneously, including by launching new categories, such as beauty, fine jewelry, and home goods, and doubling down on its sportswear-centric Linea Rossa collection in order to achieve “full potential” there. Finally, Prada said that it plans to accelerate within the customers pools that are driving market growth, namely, Gen-Z buyers, as well as those in China and the U.S.

In an earnings call on Monday, Prada confirmed its focus on bolstering its ominichannel approach, including by investing in both digital and retail operations, as well as its aim to attract younger consumers, especially in the U.S., where it is looking “not to maintain the current growth rate in the US, but to secure future customers by acquiring more young customers,” per Bernstein.

As for the the year so far, sales for 2022 are looking encouraging, per Prada, even in light of “uncertainty” due to Russia’s invasion of Ukraine. As of now, the group says that it has halted all operations in Russia, but noted that the impact is limited “even under the worst scenario,” which would see it “write off the limited inventories.” As highlighted by Bernstein, Prada Group management “indicated their interest in continuing to operate in Russia if the situation allows in future.”

Revenues for Hermès were up by 42 percent at constant exchange rates to €8.98 billion in 2021, the French luxury goods reported on Friday, up 42% at constant exchange rates and 41% at current exchange rates compared to 2020. Recurring operating income grew by 78 percent to €3.53 billion and net profit reached €2.445 billion, up 77 percent compared to 2020. Meanwhile, sales slowed in Q4 of 2021, with leather goods sales lagging by 5.4 percent compared to Q4 in 2020, prompting the Birkin bag-maker to miss analyst expectations of 12 percent growth on sales for the 3-month period by one percent. Hermès cited “capacity constraints” for its in-demand offerings as the culpit. 

Looking at its annual revenues on a regional basis, Hermès reported that Asia and America recorded “the highest growths, compared to 2020 as well as to 2019,” while Europe returned to growth compared to 2019. Sales in the Asian region (not including Japan) were up by 45 percent compared to 2020 and 65 from 2019. In America, Hermès reported sales growth of 57 percent and 24 percent compared to 2020 and 2019, respectively, citing “a strong performance, despite the sanitary restrictions imposed in several US cities in the fourth quarter.” 

In terms of product categories, Hermès asserted that as of the end of 2021, all the business lines “confirmed their growth, with a noteworthy increase in Ready-to-wear and Accessories, Watches and Other Hermès Business Lines (Jewellery and Homeware).” As usual, Leather Goods and Saddlery division sales were “exceptional,” up by 29 percent and 23 percent from 2020 and 2019 thanks to sustained “demand both for new bags like Della Cavalleria and 24/24 and the Hermès classics.” 

Annual sales by product category

Ready-to-wear and Accessories sales were up by 59 percent and 44 percent from 2020 and 2019 “thanks to the success of the ready-to-wear, fashion accessories and footwear collections;” Silk and Textiles business line “performed well” with growth of 49 percent and 15 percent from 2020 and 2019; Perfumes and Beauty sales were up (+47% and +19% from 2020 and 2019); the Watches business line continued to grow (+73% and +77% from 2020 and 2019); and quite strikingly, “Other” Hermès business lines, which includes Jewellery and Homeware, the latter of which has performed particularly well amid pandemic lockdowns, were up by 57 percent and 95 percent compared to 2020 and 2019.  

Speaking about Hermès’ revenues on Friday, Executive Chairman Axel Dumas addressed the volume growth caps that exist for its leather goods offerings, which stand at 6 to 7 percent annually, with Hermès “preferring to have long waiting lists for its products rather than accelerate production,” per Reuters. Dumas said the group has no plans of changing that despite adding new employees each year and expanding production facilities. 

“It takes 15 hours [to create an] Hermès bag,” Dumas stated. “Even if there’s a lot of demand, I’m not going to start doing them in 13 hours to raise production.” 

As for the move by luxury players to boost prices over the past couple of months and going further in 2022, Dumas confirmed that Hermès boosted prices across the globe by an average of 3.5 percent, up from its customary 1.5 percent rise, in order to account for increasing production costs in Europe. He notes that the price hike also included “regional price adjustments to account for currency fluctuations.” Setting itself apart from rivals, Dumas stated that Hermès has no plans to increase prices in order to “boost its results,” and noted that “given its hand-crafted production, Hermès is less exposed than rivals to increasing costs of energy and primary materials.”

One more takeaway comes in the form of a spotlight on the U.S. A key focus for both Kering and Hermès in connection with their earnings and future growth is expansion within the U.S. On the heels of Jean-François Palus, Kering Group Managing Director, asserting that Kering has “a significant potential in second- or third-tier cities, and new pockets of wealth such as Atlanta or Nashville or even Austin,” Hermes boasted increases driven by sales in America (+57% and +24% from 2020 and 2019), and pointed to the opening of two new stores in Troy near Detroit in June and in Aventura Mall near Miami in October. This comes amid a 5-year expansion plan for the brand in the U.S., with new stores and renovations of existing stores, including a major revamp of its Madison Avenue store in New York.

All of Kering’s brands saw “sharp sales rebounds” in 2021, the French luxury goods group revealed on Thursday, noting that revenue was “way beyond 2019 levels.” In its full-year report, Kering revealed that its sales grew by 35 percent and 13 percent compared to 2020 and 2019 to €17.6 billion ($20.01 billion). Meanwhile, the François-Henri Pinault-led group – which owns Gucci, Balenciaga, Bottega Veneta, and Saint Laurent, among other brands – reported that recurring operating income “rose sharply,” by 60 percent compared to 2020, to reach a new record of €5.02 billion ($5.71 billion), and recurring operating margin “retrieved a high level” at 28.4 percent. 

Looking at the group’s individual product categories, Leather Goods represented 50 percent of Kering’s revenue in 2021 (down from 52% in 2020 and 55% in 2019), and was “probably one of the categories most exposed to fluctuations in tourism,” which is why it “posted weaker sales growth than the other categories.” Kering noted that its Leather Goods performance “should be analyzed in the view of the very high base for comparison in 2019, as well as the houses’ prudent inventory management in 2020, which led them to limit the number of product lines and amount of stock available in stores in 2020 and for part of 2021.” Shoes followed with 21 percent of sales for 2021 (up from 21% in 2020 and 18% in 2019), and then ready-to-wear, which generated 15 percent of sales (the same as 2020 and up 1% from 2019). 

Sales for the group came primarily from the Asia-Pacific region, which generated 39 percent of sales in 2021, followed by 27 percent from North America, and Western Europe, which generated 22 percent of Kering revenue, and from its own retail operations. “Distribution is becoming increasingly exclusive, which means that the revenue contribution of the wholesale channel is gradually decreasing,” per Kering, which reported that 81 percent of 2021 revenues came from retail, with retail sales increasing by 40 percent year-over-year and 18 percent from 2019. (Brands across the board appear to be using the pandemic period as a time to drive home existing distribution restructuring efforts.)

Still yet, e-commerce continues to grow for the group, with online sales topping $2 billion in 2022, with online revenue growing by 55 percent year-over-year.

Gucci

Delving into its three biggest brands, Kering reported that Gucci – which drives the bulk of Kering’s sales and whose prices have on average been boosted substantially – enjoyed “a year of sustained growth.” The Italian brand’s revenues in Q4, alone, grew by 32 percent, quite a jump from analysts’ expectations of 18 percent. The quarterly sales boost came from “the success of its iconic lines, along with an intense schedule of events and new product launches,” including for Aria, the brand’s Balenciaga mashup collection. For the year, Gucci’s revenue rose 31 percent to €9.73 billion ($11.07 billion). Gucci’s recurring operating margin rose by 3.1 points to 38.2 percent. 

An interesting note about the Aria collection, according to a note from Bernstein on Thursday: Sales of Aria products in Gucci stores are accounted for as revenues for Gucci and sales in Balenciaga stores as Balenciaga revenues. However, the majority of sales are Gucci due to its relative size and retail footprint.

In a nod to its enduring effort to overhaul its distribution and phase out much of its wholesale efforts and focus on its own retail sales (a whopping 91% of sales came from directly operated stores in 2021), Gucci’s 2021 retail network sales grew 37 percent and 10 percent compared to 2020 and 2019, respectively, and wholesale revenue was down by 10 and 39 compared to 2020 and 2019. (Gucci is the first Kering name to embark on a drastic wholesale “streamlining,” and should complete this effort within 2022.)

As for Gucci’s sales by region, Kering stated that sales in 2021 rebounded “very strongly” in North America, growing by almost 67 percent compared to both 2020 and 2019. Revenues from North America account for 27 percent of sales, topped by Asia-Pacific with 44 percent. Growth in the Asia-Pacific region grew 29.5 percent year-on-year, with regional growth mainly driven by Mainland China, which saw firm increases in both online and in-store sales.

In a corresponding earnings call on Thursday, Kering management stated that Gucci’s growth is expected to carry on through 2022, which will see the brand continue to increase prices and boost its product mix, including by way of more Aria-like drops in stores. 

Saint Laurent 

Kering reported Saint Laurent generated €2.52 billion ($2.86 billion) in revenue for the year, up 45.6 percent and 26 percent at constant exchange rates relative to 2020 and 2019 respectively, driven by sales in North America (34%), Asia-Pacific (28%), and Western Europe (27%). Sales from directly operated stores “grew sharply” in 2021, up 55 percent compared to 2020 and 35 percent over two years, per Kering, while wholesale revenue was 23 percent higher than in 2020 and 6 percent higher than in 2019, as the brand “also started streamlining its third-party distribution.” 

For the product breakdown, sales at Saint Laurent, which is Kering’s second-largest house, are driven significantly by leather goods (a striking 72%), followed by ready-to-wear (12%), and footwear (9%), and the Kering noted that online sales proved to be a significant driver of sales, growing for a third year in a row. 

Saint Laurent is garnering a lot of attention from Kering management, which said on Thursday that it is the next house to join the realm of the “mega-brands,” particularly as its growth potential is “highly underestimated,” including in China. In short: the brand is on an “exceptional growth path.”

Bottega Veneta 

Bottega Veneta’s 2021 revenue hit an “all time high” of €1.5 billion ($1.71 billion), up 25 percent compared to 2020 and 32 percent compared to 2019, with sales driven by Asia, where its desirability has continue to increase (39%), Western Europe (24%), and then North America (18%). According to Kering, “Trends that emerged in 2020 were confirmed in 2021: in Western Europe and North America – where local customers were the first to be won over by the House’s new creative direction – sales were very strong throughout the year. Bottega Veneta’s desirability also continued to increase in Asia.” Kering highlighted the brand’s success in North America, in particular, where sales were up by 83.3 percent compared to 2020 and 67 percent compared to 2019. “This is an outstanding performance given the House’s market position and its offering, which is generally less aspirational than that of other Group brands.”

With a category breakdown that somewhat mirrors Saint Laurent’s, Bottega generates 71 percent of sales from its leather goods, followed by 18 percent from shoes, and 9 percent from ready-to-wear. 

Management’s focus here appeared to be on the “confirmed potential” of Bottega as a key brand, and against that background, plans to boost profitability. Kering stated that profitability for Bottega “is expected to continue improving gradually.” Margins came to 19.1 percent (up 4.9 points from 2020 and up 0.7 points from 2019), an increase that was driven by “positive operational leverage, even though the house invested heavily in 2021 to make its revamp a lasting success.” 

Other Houses 

Balenciaga had “another record year,” per Kering. “In particular, the leather goods offerings of Balenciaga and Alexander McQueen expanded and attracted new customers. As a result, sales in that category grew strongly.” Ready-to-wear “also delivered rapid sales growth, primarily driven by menswear collections,” while “shoes once again saw particularly strong growth in 2021, driven by the appeal of the Balenciaga and Alexander McQueen collections.” 

Reflecting on the year, Kering stated that among other things, Balenciaga, which is “gaining in distinctiveness and prestige,” has been “exploring new business models and developing new modes of engagement,” the latter of which has included an influx of Kardashian and Kanye West marketing.

M&A and Metaverse

During Thursday’s call, Pinault shed light on future M&A, stating that Kering’s “portfolio of brands is not perfect, so I can improve it significantly going forward.” The group is actively scoping out acquisition targets based on “patience, being opportunistic and most importantly, being lucid.” As for the metaverse, Kering’s chairman asserted that the group is “considering how the virtual world could potentially disrupt e-commerce,” as well as provide more opportunities for it to extend its products. At the same time, CNBC notes that Pinault revealed that Kering is considering how it could accept cryptocurrency as a payment at some point going forward.

Sales for LVMH amounted to 64.2 billion euros ($71.55 billion) for the 2021 fiscal year, an increase of 44 percent compared to the year before and 20 percent compared to pre-pandemic 2019, the French luxury goods group reported on Thursday. Organic revenue growth was up by 36 percent and 14 percent compared to 2020 and 2019, with the group saying that its performance for the year “confirms a return to strong growth momentum following the severe disruption to the first half of 2020 resulting from the global pandemic,” and noting that “within the context of a gradual recovery from the health crisis,” it is “confident in its ability to maintain its current growth momentum.”

Delving into the performance of Fashion & Leather Goods over the course of 2021, Bernard Arnault-led LVMH revealed that its largest division “reached record levels,” with revenues totaling 30.8 billion euros ($34.32 billion) for the year – up from 21.2 billion euros and 22.2 billion euros in 2020 and 2019, respectively. Operating margins were up for 2021, as well, totaling 41.6 percent (from 33.9 percent and 33 percent in 2020 and 2019). These results were helped along by a strong fourth quarter, according to the group.

Louis Vuitton, Christian Dior, Fendi, Celine, and Loewe achieved “record levels of revenue and profitability,” while Marc Jacobs “also performed particularly well.” (The big name missing here is, of course, Givenchy.) Louis Vuitton and Dior, in particular, turned “an exceptional performance,” complete with enduring rises in profitability, which LVMH confirmed was “already at an exceptional level.” Specifically, Dior – which saw the success of its new Caro bag and its caning pattern, as well as strong demand for micro bags, and the launch of seasonal capsule collections – boasted “exceptional growth in all its product categories among local customers” over the course of the year. Meanwhile, demand for Louis Vuitton was driven by its “reinvention of iconic models,” along with new artistic collaborations.

Speaking of local customers, LVMH management stated during a post-release call with analysts that local customers “are getting more selective in terms of brand choice,” with the group attracting new local customers in Europe to compensate for the lack of Asian tourists. Also worth noting: LVMH management stated that under the watch of creative director Hedi Slimane and CEO Séverine Merle, Celine has one of the fastest growth rates in the industry.

In terms of Fashion & Leather Goods sales by region, LVMH said that sales in the United States and Asia – which account for the majority of revenue – rose “sharply” in 2021, followed by Europe, finally returned to growth in Q4 compared to 2019, and Japan “with more limited growth.” 

Turning to the Watches & Jewelry division, LVMH saw “a strong rebound of activity in own stores and the successful integration of Tiffany & Co.,” which helped to send revenues up by 167 percent in 2021 compared to 2020, and boosted profits from recurring operations almost six times compared to 2020 and up 128 percent compared to 2019. The division generated the bulk of its sales in Asia (excluding Japan) and the U.S., which LVMH says are “the best performing regions.” Tiffany, alone, saw “record performance in terms of revenue, profits and cash flow, and increased its global attractivity as a result of its high impact innovations and collaborations” during its first year under the LVMH umbrella. The New York-headquartered brand – which benefitted from “strong interest” in its Knot collection, and the rapid development of iconic lines T and HardWear – was also responsible for “increased intangible assets” and “increased inventories” for the division.

Elsewhere in the group, the U.S. was responsible for the greatest increase in Perfumes & Cosmetics sales, which grew by 27 percent in 2021 compared to 2020. LVMH specifically highlighted the “enormous success” of Dior’s Miss Dior and Sauvage fragrancesnoting that in 2021, Sauvage became the highest selling fragrance in the world (women’s and men’s lines, included), which is “a worldwide first for a male fragrance.” 

Selective Retailing, the division that houses the likes of Sephora and duty-free venture DFS, saw organic revenue rise by 18 percent compared to 2020 but was nonetheless, down by 18 percent compared to 2019 due to the impact of travel retail. While DFS suffered from “the very limited recovery in international travel, travel restrictions in China, and quarantine measures in Hong Kong,” not all was lost, as growing demand from local customers helped to boost sales at the seven T Gallerias outposts in Macao. Still yet, Sephora helped buoy the Selective Retailing division by “surpassing its 2019 level of activity, benefiting from the strong rebound in its stores and the continued momentum of its online sales.” 

In addition to growing e-commerce sales for Sephora, LVMH also pointed to Loewe and Marc Jacobs, stating that Loewe’s “online sales grew significantly” and Loewe enjoyed “a highly impressive surge in online sales.” In what is likely a nod at least in part to the role of e-commerce, LVMH states that “investments in [Celine’s] omnichannel strategy played a key role in the Maison’s new gains.”

As a whole, the group reported “continued strong growth of online sales alongside the gradual return of customers in stores,” noting that in terms of efforts, including continued online endeavors, it “made the choice to keep the distribution [of its major Maisons] highly selective, limit promotional offers and develop online sales through their own websites” in order to “preserve their exceptional image – a key element of their lasting appeal.” Going forward, LVMH says it expects to double-down on “the digitization of its Maisons to enrich customers’ experiences online and in stores.”

In a post earnings call on Thursday, LVMH chairman and CEO Bernard Arnault stated that he believes that the group “has enough wiggle room to raise prices” – which has been a common move across the luxury landscape over the past couple of years, in particular – “and protect its margins in an inflationary environment,” per Reuters. He cautioned, however, that management has to “remain reasonable” when it comes to boosting prices of the group’s offerings in the year ahead.

On the topic of group’s ambitions on the metaverse, LVMH does not appear as gung-ho as some of its rivals, with Arnault saying that LVMH “is not interested in selling 10 EUR virtual shoes,” noting that “at this stage, we are very much in the real world, selling real products.” On this same note, he further asserted, “We have to be wary of bubbles,” he said. “At the beginning of the internet, there were all sorts of things popping up and then the bubble burst. There may be relevant applications, but we have to see what universes might actually be profitable.” In terms of NFTs, in particular, Arnault stated that “it will be interesting to see how it generates profit, [as] NFTs are generating profits, and I’m sure this will have a positive effect if things are done properly.”

As for what the group is interested in is what Arnault called “more useful features in the future to support real life activities,” as indicated by LVMH’s recent expansion of the Aura Blockchain Consortium, which now includes Aura SaaS, a blockchain-based platform that aims to “help brands to address authenticity, ownership, warranty, transparency and traceability … [with] lower license and onboarding fees.”

Burberry provided insight on its enduring effort to move upmarket by doing away with markdowns in a Q3 conference call on Wednesday. The British brand – which reported a 5 percent increase in sales to 723 million pounds ($985 million) for the three-month period ending in December – revealed that while its sales have not not surpassed pre-pandemic levels, momentum is building. The group pointed to a 36 percent increase in full price sales compared to the same quarter last year and a 10 percent rise over the previous quarter, “with all product categories growing by double digits, helped by flagship stores that were attracting a new generation of Burberry customers.” 

In a statement on Wednesday, Burberry Chair Gerry Murphy stated that “full-price sales continued to grow at a double-digit percentage compared with two years ago, accelerating from the previous quarter and reflecting a higher quality business.” He noted that the company’s “focus categories outerwear and leather goods performed strongly as we continued to attract new, younger consumers to the brand.” Full price outerwear and leather goods sales grew by 38 percent and 29 percent, respectively, compared to the same quarter in 2020, with the brand benefiting from sales of its “new elevated check range in Birch Brown colorway,” for instance, as well as the introduction of its “crossbody, tote and SLG versions as part of [its] Winter collection.”

Beyond outerwear and leather goods, CFO Julie Brown highlighted sales of footwear, namely, men’s sneakers, particularly among younger consumers in the U.S., which proved to be a strong region in terms of full-price sales, along with Mainland China. (“Burberry does not see any slowdown of demand in China yet, with near-term headwinds caused by regional covid-19 lockdown,” per Bernstein.) Burberry reported that “full-price comparable store sales were driven by continued strong performance in the Americas, a material sequential improvement in Asia Pacific as COVID-19 restrictions eased and improving trends in EMEIA despite an ongoing lack of tourism.” 

On the digital front Burberry’s management noted that full price sales were up by “high double-digits” across its e-commerce channels during Q3, and the brand achieved its “highest level of earned reach to date on Instagram driven by brand activations including pop-up on Jeju Island coupled with strong momentum on TikTok.” In terms of the metaverse, Burberry said that its partnership with Mythical Games this summer to release a limited NFT collection within the Blankos Block Party game was a success, with the digital tokens selling out within 30 seconds. (The NFTs released in August consisted of 750 tokens representing Sharky B, which were sold for $300, 1,500 Jetpack NFTs that were priced at $100, and $50 Pool Shoes and $25 Arm Band NFTs, which were not limited in terms of supply and were offered up for a two-week period.)

Seemingly foreshadowing more efforts within this realm, Burberry said it views the metaverse as “a great opportunity to connect with the next generation of consumers.” 

As for management, Burberry is in between CEOs at the moment, with Marco Gobbetti, who joined in the brand in 2016 and spearheaded its move more upmarket, recently moved to the same role at Ferragamo, which is in need to a significant revamp from a marketing/positioning point of view. His successor Jonathan Akeroyd, who is moving on from the CEO job at Versace, is slated to begin his tenure in April. In a note in June, Bernstein analyst Luca Solca stated that while “Burberry is in a far better position than when Marco took responsibility for it,” the “jury is still out on Burberry’s continuing momentum.”