Kering: Press release - First-half 2024 results

KERING_Press release - First-half 2024 results - 24 07 2024

FIRST-HALF 2024 RESULTS

Group revenue: €9,018 million
down 11% as reported and on a comparable basis

Recurring operating income: €1,582 million

Net income attributable to the Group: €878 million

“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. While the current context might impact the pace of our execution, our determination and confidence are stronger than ever.”

François-Henri Pinault, Chairman and Chief Executive Officer

• Group revenue amounted to €9.0 billion in the first half of 2024, down 11% both as reported and on a comparable basis.
   
• In the second quarter of 2024, revenue totaled €4.5 billion, also down 11% as reported and on a comparable basis. The decline in revenue as reported includes a negative currency effect of 1% and a positive scope effect of 1% from the consolidation of Creed.
  • Sales from the directly operated retail network fell by 12% on a comparable basis in the second quarter, adversely affected by lower store traffic. Trends in the various regions in the second quarter remained broadly in line with the first quarter, apart from a sequential improvement in Japan and a deceleration in Asia-Pacific.
    • Wholesale and Other revenue fell 6% on a comparable basis, as the Group continued to enhance the exclusivity of its Houses’ distribution. Kering Eyewear pursued its positive trend.
       
• As the Group maintains its ongoing investment in its Houses, recurring operating income fell 42% to €1.6 billion in the first half, in line with the guidance provided when the Group reported its first-quarter 2024 revenue. Recurring operating margin was 17.5%, significantly lower than in the first half of 2023, resulting from negative operational leverage. The Group prioritizes expenditures aimed at nurturing the desirability of its Houses and maintains strict control over all operating expenses.
   
• Net income attributable to the Group was €878 million in the first half of 2024.
  • Free cash flow from operations remained high at €1.9 billion in the first half excluding real estate acquisitions, thanks to good inventory management in particular. Including the acquisition of a prestigious property on Fifth Avenue in New York City, free cash flow from operations totaled €1.1 billion.
     

Operating performance

(1)    On a comparable scope and exchange rate basis.
 

Gucci

In the first half of 2024, Gucci’s revenue was €4.1 billion, down 20% as reported and down 18% on a comparable basis. Sales from the directly operated retail network dropped 20% on a comparable basis, while wholesale revenue was down 9%.

In the second quarter of 2024, the House's sales were down 19% on a comparable basis, with a 20% decline in the directly operated retail network. Performances in each region were broadly in line with those of the prior quarter, including a continuing marked decrease in Asia-Pacific. Gucci's new offering, rolled out in stores in line with plans, is well received, while sales of carryovers remained lower.

Gucci's recurring operating income totaled €1.0 billion in the first half of 2024. Recurring operating margin was 24.7%, reflecting investments to pursue the House's long-term strategic initiatives.

Yves Saint Laurent

Yves Saint Laurent's revenue in the first half of 2024 was €1.4 billion, down 9% as reported and down 7% on a comparable basis. On a comparable basis, the House's sales from its directly operated retail network were down 6% while wholesale revenue fell 25%.

In the second quarter of 2024, Yves Saint Laurent's sales were down 9% on a comparable basis, with an 8% decline in the directly operated retail network. Performance deteriorated in Asia-Pacific, while trends in Japan showed a sequential improvement. The House pursued initiatives targeting local customers, and its new collections were very well received. Wholesale revenue was down 25% in the second quarter.

Yves Saint Laurent's recurring operating income was €316 million in the first half and its recurring operating margin was 22.0%, as the House continues to invest in its communications and clientele initiatives.

Bottega Veneta

Bottega Veneta had a record first half, with revenue of €836 million, unchanged as reported and up 3% on a comparable basis. Sales from the directly operated retail network rose by 8% on a comparable basis, while wholesale revenue was down 19% on a comparable basis.

In the second quarter, the House's revenue was up 4% on a comparable basis. Sales in the directly operated retail network rose 7% on a comparable basis, supported by double-digit growth in Western Europe and North America and strong momentum in the Middle East. Sales in Asia-Pacific were resilient. Wholesale revenue was down 13%.

Bottega Veneta’s recurring operating income for the first half of 2024 totaled €121 million, and its recurring operating margin was 14.5%, reflecting significant communications expenditure as well as highly exclusive clienteling events.

Other Houses

The Other Houses' revenue in the first half of 2024 was €1.7 billion, down 7% as reported and down 6% on a comparable basis. Sales from the directly operated retail network rose 1% on a comparable basis, while wholesale was down 21%.

Second quarter 2024 sales were down 5% on a comparable basis, with contrasted performance across Houses. Sales in the directly operated retail network were stable year-on-year on a comparable basis. Jewelry Houses Boucheron and Pomellato both achieved double-digit growth. Balenciaga's sales from its directly operated retail network were unchanged on a comparable basis. Alexander McQueen continued its creative transition. Brioni posted strong revenue growth from its directly operated retail network on a comparable basis. Wholesale revenue of Other Houses was down 16%.

The Other Houses' recurring operating income in the first half of 2024 amounted to €44 million, resulting in a recurring operating margin of 2.6%. That performance is attributable to significant reinvestment in communications at Balenciaga and the impact of the transition at Alexander McQueen, while Boucheron delivered sharply higher operating income.

Kering Eyewear and Corporate

In the first half of 2024, total revenue from the Kering Eyewear and Corporate segment was €1.1 billion, mainly from the activities of Kering Eyewear and Kering Beauté, the latter comprising the sales of Creed.

Kering Eyewear's revenue in the first half of 2024 totaled €914 million, up 5% as reported and up 6% on a comparable basis.

In the second quarter, Kering Eyewear's sales rose by 3% both on a comparable basis and as reported, driven by solid progression of the brands in its portfolio.

In the first half, Kering Eyewear's recurring operating income was €196 million. Recurring operating income for the segment was €101 million, after taking into account Kering Beauté's recurring operating income along with Corporate costs (€95 million).

Financial performance

In the first half of 2024, net financial expense amounted to €288 million.

The effective tax rate on recurring income was 26.9%.

Net income attributable to the Group was €878 million.
  

Cash flow and financial position

The Group's free cash flow from operations was €1.1 billion in the first half of 2024. Excluding the acquisition of a prestigious property on Fifth Avenue in New York City, free cash flow from operations totaled €1.9 billion.

At June 30, 2024, Kering's net debt amounted to €9.9 billion.

  
Outlook

To achieve its long-term vision, Kering invests in the development of its Houses, so that they continuously strengthen their desirability and the exclusivity of their distribution, strike a perfect balance between creative innovation and timelessness, and achieve the highest standards in terms of quality, sustainability, and experience for their customers. In an environment of ongoing economic and geopolitical uncertainty, Kering will continue to execute on its strategy and vision, in pursuit of two key ambitions: to maintain a trajectory of long-term profitable growth, and to confirm its status as one of the most influential groups in the Luxury industry.

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’s recurring operating income in the second half of 2024 could be down by approximately 30% compared to the second half of 2023 (*).

The group prioritizes expenses and initiatives supporting the long-term development and growth of its houses, while pursuing with determination the actions required in the current situation to optimize its cost structure.

(*) Based on the scope of consolidation and exchange rates at the time of first-half 2024 reporting.

***

At its July 24, 2024, meeting, Kering's Board of Directors, chaired by François-Henri Pinault, approved the consolidated financial statements for the six months ended June 30, 2024, which were subject to a limited review.

About Kering

Kering is a global Luxury group that manages the development of a collection of renowned Houses in Fashion, Leather Goods and Jewelry: Gucci, Saint Laurent, Bottega Veneta, Balenciaga, Alexander McQueen, Brioni, Boucheron, Pomellato, Dodo, Qeelin, Ginori 1735, as well as Kering Eyewear and Kering Beauté. By placing creativity at the heart of its strategy, Kering enables its Houses to set new limits in terms of their creative expression while crafting tomorrow’s Luxury in a sustainable and responsible way. We capture these beliefs in our signature: Empowering Imagination. In 2023, Kering had 49,000 employees and revenue of €19.6 billion.