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Research Tree provides access to ongoing research coverage, media content and regulatory news on Kering. We currently have 13 research reports from 1 professional analysts.
Gucci’s sustainable appetite maintains the booming sales for Kering. Other brands are accelerating and all distribution chains are performing well. The outlook is strong.
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 13 research reports from 1 professional analysts.
Footasylum is investing for growth in areas where there is a more predictable rate of return. The focus on more store upsizes is sensible as this aligns its strategy with the brands it retails but should also ensure a more predictable payback on capital spend.
We reassess our forecasts below, no significant changes to the P&L and the company produced a strong start to FY18e where revenue in the 1Q18 was +60% YoY to €4.8m, maiden dividend of 0.25p proposed. AGM in July should provide detail on timing of dividend.
Companies: Veltyco Group
boohoo.com has delivered solid Q1 Group revenue growth of 53% to £183.6m, with standout like-for-like growth of 158% delivered by PLT. At a Group level, the UK saw strong growth of 49%, while international sales were up 60%. Group gross margins increased 100bps to 55.2%, reversing the downward trend seen over the last few years, driven by strong full-price sales performance in PLT. The boohoo brand delivered growth of 12%, however we flag this is versus a tough comp of 48% growth in Q118, with increased sales and promotional activity early in the quarter causing a reduction in gross margin to 52.0% from 53.9%. Promotional activity has since slowed, and the GM exit rate actually was up YoY, giving scope for the business to implement growth measures which should boost growth rates as the comps get easier.
Hardman & Co recently welcomed Milan Radia to our roster of established, industry expert analysts. Milan has 25 years of equity market experience at major investment banks and in asset management, and has worked on many high-profile successful IPOs. In 2017, he was ranked the No.1 earnings estimator in the UK for his sector in the Thomson Starmine Awards. Milan has also been techMARK Analyst of the Year and achieved top three Institutional Investor sector rankings for his coverage of the software and telecoms sectors. In our lead article this month he gives an insight into his thinking on some key themes in the sector.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BNO BUR CMH CLIG COS DNL EVG GTLY GDR INL KOOV MCL MUR NSF OXB NIPT PHP RE/ REDX SCLP SCE SIXH TRX TON VAL
Sales grew 53% in Q1 despite slower Boohoo growth, and gross margin smashed consensus expectations. This increases flexibility to reinvest and drive future growth and upgrades. Boohoo’s growth should pick up via overseas expansion, improved customer frequency and easier comps. We have raised FY19 EPS by 4% but growth assumptions in H2 and outer years still look prudent. To reflect confidence in the growth and future profit dynamics we lift our target price to 250p (225p). If PLT’s DC move is executed well, and Boohoo growth rebuilds back to c20%, we would expect the share price to test new highs. Interims in September will better inform us on these dynamics. Sustainable growth, attractive EBITDA margins and strong cashflow, helped by a sector-leading working capital surplus, means we stay at BUY.
With these better-than-expected FY18 results (PBT £1.6m vs fC est of £1.4m), BoTB has clarified its strategic decision to become solely a pure-play online operator, completing its move away from its legacy physical retail locations. This is a significant moment for the BoTB investment case. We view this decision as a sign that BoTB is unequivocally entering into a distinctive new phase of growth which, in turn, should have important positive long-term implications for sentiment, forecasts and valuation. Another special dividend (4.5p) is announced, thereby continuing BoTB’s recurring but not formalised programme of special capital returns, and attesting to BoTB’s strong cash generation.
Companies: Best Of The Best
The proposed acquisition of easyGym stacks up strategically and financially. It further reinforces the Groups roll-out and consolidation led growth model and strengthens its position in the value segment. Current trading is strong with positive commentary around the premium pricing initiative. We will publish formal forecasts in due course but our preliminary analysis suggest 9%/8% EPS accretion in FY19/FY20. Premium pricing success should add at least a further 5% to these estimates, implying a look through FY19 P/E of 18.5x vs a 3 year EPS CAGR >30%. We lift our 12m TP to 335p – Buy.
Companies: Gym Group
FY18 results confirm the progress made and have surprised significantly ahead on FCF, EPS and dividends. The group is increasingly well balanced with growing exposure to both online and international markets and we see the acceleration in customer growth spend as sensible capital allocation given: (1) an IRR of 89%, and (2) low leverage with Net debt 0.35x EBITDA.
Companies: Majestic Wine
Last year, Venture Capital Trusts raised the second-highest amount since their launch in 1995, according to the Association of Investment Companies. This is good news for smaller companies seeking growth finance. Changes to pension regulations mean that VCTs are expected to continue to attract investors. Individual qualifying companies can receive up to £10m from VCT investors.
Companies: KEYS NBI MPM PTY BOO W7L
Our updated pro-forma GVC forecasts reflect the increased LCL synergy targets (from £100m to £130m), as well as the new £2 FOBT stake limit. Overall, the investment thesis remains unchanged: GVC’s enlarged business benefits from a highly scalable technology, strong brands and diversified revenue streams. We expect strong FCF to simultaneously drive down debt and return cash to shareholders. Additional upside should come from the opening of the US market, where we anticipate opportunistic expansion. The stock trades appropriately towards the top end of its peer group, at 10.8x EV/EBITDA and 14.2x P/E for FY18e.
Dixons Carphone (DC LN,197p, Hold, TP 175p)Prelims –No change to anythingDC released an un-scheduled year end trading update on 29th May at which it principally reduced market consensus PBT estimates for the year to April 2019 from £380-390m to £300m. This was based on further weakness in demand in its UK markets, opex increases to reverse perceived underspend and continued uncertainty as to the shape of the UK mobile market.
Companies: Dixons Carphone
Footasylum offers a double-digit EPS CAGR from store roll-out, a highly accretive digital model and a new wholesale business. The sustainability and predictability of revenues hinges on a deep understanding of its customer base.
FOOT held a brief CMD yesterday with presentations led by CFO Claire Nesbitt and CFO Danielle Davies. Overall we found the presentation credible and the management knowledgeable. That said the strategy is based significantly on physical expansion from 65 current UK stores to a target of 150 in the UK and EBITDA margins are low (at 7.6% 2/17A v JD Sports 13%) and likely to remain so in the near term as the business invests in infrastructure.
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
Whitbread reported FY 17/18 preliminary results. Revenues were £3.3bn (+6.1% yoy) and the underlying operating profit came in at £622m (+5.0% yoy), both slightly above consensus expectations. The underlying profit before taxes has increased by 4.5% to £591m, fuelled by the operating profit growth of both Premier Inn and Costa. Outlook updated Based on the tough high street consumer environment, management expects profit growth will be lower in the near term than in the previous year. The company has achieved cost savings of £105m this year, and it will continue to focus on the value chain optimisation. The savings target has been increased from £150m to £250m for the next two years.