Research, Charts & Company Announcements
Research Tree provides access to ongoing research coverage, media content and regulatory news on Kering. We currently have 12 research reports from 1 professional analysts.
A spectacular performance from Gucci, alongside a strong performance from the other brands in all geographies, have led to a record year for Kering. The medium-term target is to consolidate the organic growth away from acquisitions for the time being.
In a surprising move, Kering has decided to reduce its stake in Puma from 86% to 16% through distribution in kind to Kering shareholders. Artémis would then be the strategic shareholder in Puma with c.29% of its share capital.
Another excellent quarter has been released by Kering with an impressive performance in all geographies and across all product categories. Almost all group brands experienced strong market momentum except for Bottega Veneta and Volcom. Group sales were up 28.4% lfl to €3,925m (+23.2% reported) in Q3. Luxury sales soared by 32.3% lfl to €2,678m. The flagship Gucci rocketed 49.4% lfl to €1,554m. Sales at Bottega Veneta are still lagging but increased by a modest 0.9% lfl (-4.5% reported) to €280.7m. The first collections of Anthony Vaccarello enjoyed strong momentum and pulled up YSL sales by 22.2% lfl to €383.7m. All other luxury brands experienced strong momentum (+17% lfl). Sports & Lifestyle products edged up 15.9% lfl (+11.9% reported) to €1,191m. Puma soared by 17.3% lfl to €1,126m but Volcom is still struggling. As regards geographies, Western Europe and Asia Pacific outperformed, stepping up 32% and 36% lfl respectively in Q3. A lower growth of 21% and 26% was reported in North America and the rest of world countries respectively. In Japan, sales increased by 13%. Ytd sales amounted to €11,221m (+27.2% lfl). Luxury revenue inched up 29.6% lfl to €7,709m and Sports sales were up 14.9% lfl to €3,278m.
Group sales were up 24.6% lfl (+25.4% reported) to €3,722m in Q2, bringing H1 sales to €7,296m (+26.5% lfl). Luxury sales surged by 25.3% lfl to €2,614m and Sports revenue edged up by 14.7% to €1,022m in Q2. H1 luxury sales amounted to €5,031m (+28.3% lfl), followed by sports revenue of €2,086m (+14.3% lfl). A sharp jump in margins was reported in H1. The recurring operating margin rose 330bp to 17.5% with a recurring operating profit of €1,274m (+57%). The two product categories experienced a sharp increase in margins mainly with Gucci, YSL and Puma. Recurring operating income from luxury products soared by 49.4% to €1,254m. Sports & Lifestyle generated a recurring operating income of €110m (+128.7%). Group net income surged by 77.6% to €825.8m. The financial position is improving with net debt decreasing by 9.8% to €4,572m. FCF from operations has more than doubled to €718m.
The Gucci owner impressed with sharp quarterly growth acceleration in Q1. In fact, sales soared by 28.6% lfl (+31.2% reported) to €3,573m. A favourable comparable basis has helped deliver such a striking performance as sales growth in Q1 16 slowed down to 4% lfl. The outperformance was driven by increasing volumes and rising traffic across regions. The climb in Chinese demand, the recovery in Russia and the dynamic tourism in UK have pulled up the group’s performance to its highest in four years (on a sequential basis). Both retail and wholesale channels accelerated. Online sales jumped 60.1% on a comparable basis. Luxury activities were up 31.6% lfl to €2,417m and Sports edged up 14% lfl to reach €1,064m. As regards brands, Gucci was the best performer growing by 48.3% lfl to €1,354m. YSL maintained its pace of growth and increased by 33.4% lfl to €364.4m. The first collections of Vaccarello were well received in stores in January. Bottega has finally marked its upturn with a low single-digit growth of 2.3% lfl to €280.4m. Other luxury brands were up 12.3% to €418m. For Sports & Lifestyle, the repositioning of PUMA is still delivering double-digit organic growth with a 15.3% lfl sales increase to €1,009m. Although, other brands are struggling (-6.3% lfl). As regards geographies, Kering experienced strong momentum in almost all regions. The sound recovery in China raised comparable sales in Asia Pacific by 42%. The weakening pound has buoyed up revenue in the UK and enhanced sales in Western Europe (+34%). In North America, the pace of growth was softer at 25% lfl. The momentum in Japan is challenging and sales were up 1%.
Kering posted a double-digit growth rate in Q4 with sales edging up by 10.4% lfl to €3,507m. Luxury revenue surged by 11.3% lfl to €2,477m, underpinned by outperformance at Gucci and YSL (+21.4% and 20.5% respectively). Puma performed well and grew by 9.8%, raising Sports & lifestyle sales to €1,022m (+8.6% lfl). Full-year sales were up 8.1% lfl (+6.9% reported) to €12,385m. Luxury sales stepped up 7.8% lfl to €8,469m, boosted by the strong momentum reported by Gucci and YSL which grew by 12.7% and 25.5% to €4,378m and €1,220m respectively. Other brands posted sales declines, led by the struggling Bottega (-9.4%). Sports activities posted a 9% increase in sales to €3,884m, underpinned by the solid growth posted by Puma which raised sales by 10.4% to €3,642m. Other brands deepened their decline to 8.4%. Strong market momentum was experienced in Western Europe and Asia Pacific which posted a double-digit growth rates, while North America and Japan reported sluggish performances. The gross margin gained 190bp to 62.9%. Recurring operating profit edged up 14.5% to €1,886m bringing the corresponding margin to 15.2% (up by 100bp). Both sports and luxury segments experienced sound margin rises. Luxury activities generated a recurring operating profit at €1,936m (+13.3%), pulled up by the booming YSL (+59.3% to €268.5m). Sports & Lifestyle profit soared by 30% to €123.2m, generated fully by Puma up to €126.6m (+37%). Net profit amounted to €813.5m (+16.9%) including an exceptional loss from discontinued operations of €11.6m. The financial position is improving with a retreating gearing to 36.5%. The proposed dividend is €4.6.
The group has sharply accelerated its pace of growth in Q3, surging 10.5% lfl to reach €3,185m (+10% reported). All regions apart from Japan experienced double-digit organic growth led by Asia Pacific which edged up 17%. In Japan, things turned around and slipped 6%. Amid such slumping demand, the luxury division has outperformed and grew by 11.3% to €2,115m, boosted by the favourable momentum enjoyed by the retail network which is being restructured. The flagship brands, Gucci and Yves Saint Laurent, have expanded their market shares and grew 17% and 34% respectively. The other luxury brands maintained a low single-digit growth (+2.5%) with a deep 10.9% slip at Bottega which was due to lower tourist inflows in France and Japan. Sport & Lifestyle grew 9.3% on a comparable basis to reach €1,064m led by Puma (+10.8% lfl) and driven by footwear products. The expanding online platform raised luxury e-commerce by 50% boosted by consistent offering and brand positioning. Up to September, sales amounted to €8,878m (+7.3% lfl). Luxury brands gathered sales of €5,993m (+6.5% lfl) and Sports revenue came to €2,861m (+9.2% lfl).
Consolidated sales were up 3.3% (5.5% on a comparable basis) to reach €5,693m in H1 16. The pace of growth has slightly accelerated in Q2, posting a 3.8% increase vs. 2.7% in Q1. Q2 luxury sales were up 3.3%, bringing the H1 performance to 3.1% with sales of €3,878m. The division was boosted by an impressive outperformance by YSL, which surged by 23.7% to reach €548m in the first six months. Gucci’s sales increased by 3.9% to €1,947m. All other luxury brands’ sales turned down, including Bottega Venetta’s which dwindled by 9.2%. Sport & Lifestyle sales grew by 5.1% in Q2 generating H1 revenue of €1,797m (+3.8%). The activity benefited from the recovery in the appeal for Puma, which was up 5.3% (€1,686m), while other sport brands were down 14.9%. Concerning margins, EBITDA was up 4% to reach €4,011m, resulting in an EBITDA margin of 17.8%. The operating margin gained 0.2% to 14.2%, drawing an operating profit of €811.1m (+4.9%). Net income surged by 9.9% to reach €464.9m. Profitability benefited from the marked performance of YSL, generating an operating profit of €109m (+80.2%). Gucci saw operating income of €536.9m, i.e. an increase of 7% and an operating margin of 27.6%. Sports’ operating profit jumped 9.7% to €48.1m, underpinned by the strong performance of Puma. The financial structure remains quite sound with decreasing net debt from €5,337m in H1 15 to €5,066m a year later. Operating FCF rocketed to €323m in the first half of 2016 compared to €58m in H1 15. Comparable revenue growth was solid in both mature and emerging markets with a marked performance in Western Europe and Japan.
Kering posted healthy growth against a tough backdrop. Q1 sales increased by 2.7% (4% on lfl basis) to €2,724m. The luxury activities grew by 2.8% (2.6% lfl) with sales worth €1,804m. Both retail and wholesale posted positive momentum (+3%) while royalties decreased by 16%. The Sport & Lifestyle division benefited from the strong growth of Puma to deliver an organic growth of 7%, although, the negative exchange rate impact pulled down the reported growth to 2.6%. The company experienced good sales momentum in Western Europe (+10%) accounting for 31% of consolidated sales, in Japan (+7%) and in the emerging countries (+7%). Asia Pacific posted poor growth of 1% while North America dropped by 3%. The luxury retail network accounted for 1,259 stores, of which 522 branded Gucci. The flagship brand contributed 50% to luxury sales amounting to €894m boosted by solid growth in Western Europe (+20%). Bottega Veneta experienced a sales drop in all regions, posting a 7.6% decline. The Slimane collections led Saint Laurent goods to outperform the market and enjoy double-digit growth in all regions with a 27.3% reported sales surge. Jewellery brands recorded good sales momentum, while watches were pulled down by the sluggish demand. The Sport division benefited from the strong growth recorded by Puma in all categories and posted 7% comparable growth. Strongly positive momentum was reported in all regions except for North America with a weak 1% increase.
Kering Group posted a solid FY2015 sales growth of 15.4% (4.6% on comparable scope), amounting to €11.58bn. The fourth quarter has impressed with 8% organic growth to €3.18bn. The luxury unit’s sales climbed by 7.2% at a constant basis, while the Sport & Lifestyle segment grew by 9.8%, sustained by the solid sales momentum of PUMA which grew by 11.7% in Q4. Year-on-year, the luxury activities reported consolidated sales of €7.86bn, i.e. an increase of 16.4% vs. 4.1% lfl growth. Brand-wise, the iconic Gucci displayed the first signs of recovery after two years in decline, growing by 0.4% on a comparable basis, driven by directly operated stores in mature and emerging markets. Furthermore, YSL did well, being the best performer with 25.8% organic growth. The Sport & Lifestyle sales were up by 13.5% (5.9% at constant currency) to €3.68bn, pulled up by the upturn of Puma growing by 6.8% at constant rates. EBITDA climbed by only 3.3% to €2.06bn, dropping the EBITDA margin to 17.8%. The operating income from recurrent operations was 1% down to €1.65bn, dropping the operating margin to 14.2% compared to 16.6% in 2014. The deterioration was due to the sport & lifestyle activity showing an operating profit declining by 31.1%. The adjusted recurring net income amounted to €1.02bn vs. €1.18bn a year earlier, i.e. down 13.6%. The proposed dividend remains unchanged at €4.
Revenues reached €5,512m, up 17% as reported and 3.5% in organic terms. Revenue generated by the Luxury division rose 18% as reported and 2.8% on a comparable basis. This overall performance was fuelled by a much stronger showing by the luxury brands in Q2 as a result of a significant increase in purchases by Chinese tourists, particularly in Western Europe but also in Japan. Revenue for the Sport & Lifestyle division was up 15.5% as reported. At comparable exchange rates, revenue growth came to 5.3%, driven by the achievement of strong sales momentum due to Puma's relaunch plan implemented from the second half of 2014. Consolidated EBITDA came to €972m, on a par with the first half 2014 figure as reported, and the EBITDA margin narrowed by 300bp on a reported basis to 17.6%. The Luxury division's recurring operating income amounted to €806m for H1. The recurring operating margin came in at 21.4%, down 380bp. More than half of this decrease was due to the combined effects of exchange rate fluctuations and currency hedges, which had a massive dilutive impact in the period. The remainder of the decline was attributable to the contraction in recurring operating income posted by Gucci and a weaker performance in Watches.
Sales at the Gucci brand have failed to match the performance of the group’s smaller labels in recent years. New CEO Marco Bizzari's action plan is to rejuvenate the brand with a more contemporary vision by investing more in Fashion. Q2 results due to be released on 27 July will not yet benefit from better momentum at Gucci.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Kering. We currently have 12 research reports from 1 professional analysts.
We look at Directory/Online relative under-performance in the UK online clothing market and consider the implications for future recruitment behaviour. Next continues to run this business to maximise returns from existing customers. With its Retail business going backwards rapidly and an already-high EBIT margin in ND/NO Next needs to change its behaviour in terms of growing its sales base more rapidly online in our opinion. We are not sure this will happen. We retain our sell rating.
Dunelm has reported positive Q3 trading today. LFL growth of 4.6% included 1.2% in-store and 35.7% online. While this included a small Easter timing gain (of c0.5%), this performance is considerably better than the market had feared/been pricing in. The group’s store/service strategy and step-change in online capability means strong share gains are being made as it further distances itself from the discounters and independents in what remains a highly fragmented market. As expected margin was slightly down and guidance for an uplift in Q4 (and H2 overall) remains intact, with prior end-of-season now mostly dealt with and spr/sum 18 seasonal stock under control. As a result expectations for the full year are unchanged versus expectations that were previously downgraded by c4% at the interims 8 weeks ago.
Companies: Dunelm Group
Naked Wines is accelerating growth in order to gain market share. The quality of earnings and customers is best shown by its sector leading KPI’s.
Companies: Majestic Wine
As previously reported at Final Results (22nd March) Safestyle has faced investigation by the Health & Safety Executive (HSE) regarding two incidents involving injuries sustained whilst working at height. An update released yesterday confirmed Safestyle has received a fine of £850k in relation to one of these accidents in which a contractor sustained a knee injury. The fine imposed falls at the lower end of the previously indicated range of £550k to £2.9m and reflects Safestyle’s full co-operation with the investigation and the guilty plea entered by the Group. The second incident remains under investigation with a further update to be issued in due course. The exceptional nature of this fine means our underlying profit forecasts remain unchanged. We have adjusted our cash flow and balance sheet to reflect the payment of the fine, which will be funded from existing cash resources, resulting in a £0.9m decline in forecasted net cash for FY18 and FY19. The shares trade on an FY18 PE ratio of 7.0x falling to 6.3x in FY19 and currently yield 13.9%.
Companies: Safestyle UK
This quarter we use finnCap’s Slide Rule to provide both top-down and bottom-up analysis of the UK’s Technology and Telecoms sectors. Our findings are very reassuring: the Tech sector scores the best (across all sectors) when considering Growth and Quality – Taptica*, Frontier Developments* and dotDigital* in particular stand out on these metrics. Given these attractive characteristics and growth prospects, the Tech sector is unsurprisingly one of the most expensive – currently trading at 17.2x FY1 EV/EBIT and 23.8x FY1 P/E, versus 15.0x and 18.5x respectively for the wider market. Despite valuations appearing high, we believe there are value opportunities. For example, Proactis* features in finnCap’s QVGM+ portfolio (ranked 17/462) – the company offers attractive organic and inorganic growth, with earnings forecast to grow by 26% CAGR over the next two years, but despite this, only trades on 15x FY1 earnings and offers 8% FCF yield in FY2.
Companies: 7DIG ALT AMO ARTA BOTB BLTG CTP CITY D4T4 DTC DOTD ELCO ESG FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET PHD QTX QXT RCN 932 SSY SEE SIM SPE SRT STR TAP TAX TEP TPOP TRAK UNG VIP ZOO CYAN ONEV
New enlarged GVC is a business with substantial depth and breadth by product, channel and geography, with its own proprietary technology to boot. We estimate the new business will generate c. £3.5bn of revenue and c. £900m of EBITDA in FY19E. Our forecasts include guidance from management on staged synergies (£7m, £33m, £56m and £100m year four). We think this is a case of under-promise and over-deliver as management has a track record of integrating businesses (Sportingbet & Bwin.Party), firstly ahead of schedule and secondly with enhanced synergies.
PTEC announces the proposed acquisition of Snaitech S.p.A a leading gaming and betting operator in the Italian market for a consideration of €846m funded by existing cash and debt. The deal appears profit enhancing on first take at 6.2x EBITDA (c. 5.8x post €10m synergies), PTEC on c. 7x FY18 EBITDA. Two stage deal: initial acquisition (70.6%) expected to complete in the 3Q18 and final transaction (29.4%) to complete in the 4Q18.
Findel has already issued 2 good statements this year. Today’s year end trading update confirms encouraging group trading has continued in the last 10 weeks. As a result PBT is expected to be at the upper end of expectations, with c20% YoY growth. Net bank debt was also slightly better than expected (at c£79m adjusting for timing differences). With the customer redress payments progressing to plan, the group is well on track to return to positive free cash flow from FY20. We expect this update to be well received by the market noting that, despite outperforming over 3 and 6 months, the 9x P/E still offers plenty of scope for re-rating. Rolling forward a year, our SoTP based estimate of fair value increases by 15% to 318p.
This week GAN has announced further market share gains in Italy and a key extension with Paddy Power Betfair in New Jersey. Both of these deals support forecasts.
Companies: GAN Plc
Asos has reported sales growth in the low range of guidance in H1 and its operating margin was slightly down. Sales increased by 25% at CER and the operating profit edged up 9.6%. Guidance is maintained unchanged for sales and the operating margin, but upgraded for capex.
FY 18 FD EPS 5% ahead of expectations helped by a lower tax charge. FY 2018 net debt worse than expected partly due to cash exceptionals, but 94% cash conversion and last week the S&P re-affirmed The AA’s credit rating.
Air Partner has pursued a strategy of expanding its range of aviation services. Acquisitions have added new capabilities, with a focus on consulting and training activities that offer more stable and predictable earnings streams.
Companies: Air Partner
Access Intelligence plc* (ACC.L, 4.1p/£16.1m) Finals: Good Vuelio growth in H2 | Tekcapital plc* (TEK.L, 19.5p/£8.3m) Lucyd funding update: Successful blockchain token generation event | The Character Group plc* (CCT.L, 465p/£98.3m) Toys R Us UK administration | GAN plc (GAN.L, 28p/£18.7m) Meeting with management: Simulated growth | Crimson Tide plc (TIDE.L, 2.95p/£13.4m) Trading statement: FY17 in line, further investment in FY18
Companies: ACC TEK CCT GAN TIDE
Applied Graphene Materials (AGM LN) Collaboration on W Motors Fenyr SuperSport car | ATTRAQT Group (ATQT LN) Opportunities intact, focus on execution | Domino’s Pizza Group (DOM LN) Good set of finals and strong start to FY18 | Frontier Smart Technologies Group (FST LN) Strong results with more to come | Spirent Communications (SPT LN) Good progress in FY’17 | Summit Therapeutics (SUMM LN) Enrolment opened for an additional group in PhaseOut DMD trial
Companies: AGM ATQT DOM FST SPT SUMM
FY results are in line with lowered expectations. PBT fell 28% on flat sales and a 250bp hit to gross margin. 2018 brings challenges from a weak market and the competitive actions of an aggressive new entrant, which has taken a sizeable number of Safestyle’s lead generators.
Companies: Safestyle UK