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Research Tree provides access to ongoing research coverage, media content and regulatory news on Kering. We currently have 10 research reports from 1 professional analysts.
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 10 research reports from 1 professional analysts.
A shake up of UK retail betting shops or LBO’s is pending final outcome of a consultation on 23 January 2018. Limits on B2 (FOBT) machines proposed at £50, £30, £20 or £2 a spin. We estimate at £2 limits earnings for WMH and LCL would fall by c. 49% and c. 57% respectively (assuming no self-help or mitigating factors). We estimate the market is pricing in a £20 limit outcome.
Companies: GVC WMH PTEC
Interim results to 31 October are impressive. They echo comments made at the AGM in September. Net cash at end September was £64.4m (August: £65m). UK – continues to grow fast & profitably - Revenues rose 118%: “more than double the same period last year”; - Average revenue per instruction rose 14% to £1,138; - Gross profit margin rose to 56.5% (1H17: 55.6%; 2H17: 56.4%); - Administration overhead rises to £9.3m (1H17: £3.8m; 2H17: £5.3m); - Media spend of £10.1m as guided; 2H spend to rise to £13m; - UK Adj EBITDA was £4.7m (1H17: £0.3m; 2H17: £1.1m); Australia – developing faster than UK (at similar period of development) - Revenues of £6.8m (1H17: £0.4m) are “many times ahead” of last year; US – launch in September 2017 is “ahead of schedule” - Launch in January of San Diego, Sacramento & Fresno with 18 LREEs. The CEO’s commentary updates revenue guidance for the UK from £80m to £84m and refers to Purplebricks “overseas expansion progressing well.”
Companies: Purplebricks Group
Since April, our growth style screen has performed very strongly, outperforming the main small-cap index by 20pp and 24pp on an unweighted and weighted basis respectively, also comfortably outpacing microcap. In this note we provide more detail on the constituent and basket performance in the period and present the new screen constituents. As usual we focus on 10 of the current constituents, providing brief summaries and financials for clients to consider. We will refresh again in 5-6 months time and report back on performance.
Companies: SUN DOTD ERGO TEF AVG SOG COR FEN LOOP YU/
We use this note to address some concerns weighing on investor sentiment post the AGM update. We conclude these are overplayed and detract from the excellent work done by management to position CVS for sustained value accretion. The 15% de-rating is overdone on fundamental analysis and relative to major sector deals. Overall, we see the current share price weakness as a rare buying opportunity.
Companies: CVS Group
Topic of the quarter: It’s alive! Infrastructure and assets in general have traditionally been built to provide a fixed service and are maintained and renovated to a fixed schedule – dead and dumb. Technology will completely change this. Sensors and wireless networks have the potential to allow assets to ‘talk’ to us. These living, smart assets will be able to tell us when they need maintenance, how efficient they are being and provide the data that will directly influence their construction, availability and use. The implications for construction costs through to operating costs and the ability to service changing user needs are very significant. The Support Services, Construction and Technology sectors need to work together to maximise this potential, recognise and harness the power of data, and invest in and embrace change. These are daunting challenges in highly competitive markets where politics play a role, different skill sets (that are currently in short supply) are needed and shareholders are looking over management's shoulders. However, the prize for those companies who get it right is significant, and the risk from not changing much greater. There are positive early signs with Crossrail providing tangible examples of Smart Infrastructure using innovative sensors.
Companies: FOUR ACL BOOT CLL CNCT FCRM LOK PPH RNWH STAF UTW WATR VANL WYG
BOTB has announced a change to its tax regime, such that the company now expects to pay Remote Gaming Duty (RGD). As such, we update our forecasts accordingly – EBITDA reduces by £0.3m to £1.5m in FY18E and by £0.6m to £1.3m in FY19E. Despite this unfortunate news, we stress that trading should continue as normal (existing underlying forecasts are essentially unchanged) and BOTB should remain a profitable and cash-generative business. Indeed, the short-term position could improve thanks to an unconcluded VAT claim for £4.5m (gross of expenses).
Companies: Best Of The Best
In an unscheduled trading update today, SFE indicates slightly weaker sales than hoped since the last formal update in September, and leads coming at a slightly higher cost of acquisition and lower margin. This has been exacerbated in Dec by delays to their installation programme due to the snow, which will delay some business into Q1 next year. The net effect is a shortfall of c£1.5m versus previously downgraded expectations, and guidance towards c£15m PBT. This equates to a 10% downgrade and a YoY decline of 27%. The net cash position remains strong though and at £12m varies only slightly to our £12.8m forecast. This underpins the Board’s commentary about retaining the progressive dividend policy. Initiatives to drive cost savings and conversion enhancements are advancing and this will support some recovery next year. However, given the lower base and tough end market conditions, management is guiding towards only modest growth, suggesting the downgrade ripples through to next year.
Companies: Safestyle UK
H1 revenue came in at £27.5m (+41% YoY), gross profit +32% to £11.8m (margin -270bps to 42.8%), headline EBITDA at £4.5m (+18% YoY, margin -320bps to 16.3%), PBT of £1.1m (+17.5% YoY) and headline diluted EPS of 0.4p (flat YoY). Trading reflected a softer Summer across suburban London driven by adverse weather and lower inbound tourism as well as a more benign operating environment in the PY vis a vis ingredients inflation, rates and levies, NLW and real wage growth supporting H1’17 revenue, headline EBITDA and headline PBT growth north of 40%. We retain our existing forecasts and 19p PT for now.
Companies: Fulham Shore
We update our forecasts to reflect the disposal of Marshall Leasing (MLL) and the closure of six loss making sites (5 franchised dealerships and 1 used car centre). We downgrade our adj. PBT forecasts for 2018E and 2019E by 15.1% and 15.4% respectively. We see the disposal and the portfolio update as positive for Marshall Motor Holdings (MMH), allowing the group to strengthen the balance sheet by reducing financial leverage and focus the business model at a time of uncertainty across the sector.
Companies: Marshall Motor
In the October edition of the Hardman Monthly newsletter, Chief Executive, Keith Hiscock analyses the much misunderstood – but highly important – issue of stock liquidity. In particular, he focuses on the lower echelons of the Main Market and of AIM.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GTLY MCL MUR NSF OBT ODX OXB NIPT PHP PURP RE/ RGD SCLP SPH SCE TRX VAL
For investors wondering where all the shoppers have been, they have probably been shopping online at Boohoo... and will be logging in again this weekend after the UKs fashion press, bloggers, vloggers and influencers give what will inevitably be a lot of positive commentary to spring/summer lines showcased at its fashion event yesterday. Boohoo, Nasty Gal and Boohoo Man were represented and of particular interest according to feedback at the event were Premium, Curve, Menswear and athleisure lines across brands. The mood of the team was very upbeat and their continuing focus on capacity solutions means risk there is being managed. After the recent 30% correction there is scope for shares to rebound. We move back to buy.
Vague intentions re mobile model re-positioning, containable profit guidance reduction 5% as current trade holds up – the Elephant is Still in the Room
Companies: Dixons Carphone
Whilst the drag in the UK was in line with expectations, relating mainly from the Beds re-ranging programme which was accelerated and completed in Q2, the European business dropped back to a small loss, and accounted for the £2m miss versus our H1 forecast. The cause was a change of discounting approach, which can and will be reversed. Despite encouraging share gains in the UK from the strategic transformation, and an expectation that Bed performance will strengthen in H2, domestic conditions are tough and the shortfall left by Europe is unlikely to be offset. FY guidance is therefore towards the lower end of the range, implying downgrades of c5-6%.
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 CFHL CYAN ISL DTC DOTD ELCO ESV FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET ONEV PHD QTX QXT RCN 932 SSY SEE SIM SPE SRT STR TAP TAX TEP TPOP TRAK UNG VIP ZOO
Underlying EBITDA slightly weaker than expected at +7% yoy but FY guidance range re-iterated at +5-15%. Debt increasing £472m v £182m FY 17. Some relatively large swings in composition – International better than expected, US sizeable EBITDA impact – highlight low transparency.
Companies: Sports Direct International