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Kering Continues to Break Records With Profits Up 185 Percent

The conglomerate continues to rake in the cash thanks largely — but not *only* — to Gucci.
Gucci's Fall 2018 Campaign. Photo: Glen Luchford/Gucci

Gucci's Fall 2018 Campaign. Photo: Glen Luchford/Gucci

Last year, Kering experienced its most profitable year on record, and it's already angling to beat that record in 2018. In the first six months of the year, the French owner of Gucci, Saint Laurent, Balenciaga and more experienced profit growth of 185 percent, meaning it nearly tripled from the same period last year. Total comparable revenues were up 33.9 percent to $6.4 billion. During a webcast earnings presentation Thursday, Group Managing Director Jean-François Palus called the period "one for the record books."

As is to be expected in today's era of Alessandro Michele, that's largely thanks to Gucci, which saw 44 percent growth in comparable sales in the first half of the year, with that percentage being slightly lower in the second quarter than it was in the first quarter — mainly because its comparable growth in 2017 was so monstrously huge during this time period that it's facing tougher competition from itself. The brand's sales were still up across the board, in all regions and categories in the second quarter. Sales in its own stores rose 43 percent while online sales rose 88 percent and wholesale increased 23 percent. Overall, its half-year sales this year were equivalent to its full-year sales in 2015.

And yet, executives seemed to want to emphasize that Kering's financial success was not only because of Gucci — perhaps because its largest brand's growth is beginning to level out. Saint Laurent is still on an upward trajectory with comparable sales up 19.7 percent. And while Kering considers it too small to break out numbers, Balenciaga is said to be "on a roll." Meanwhile, the company has recently turned its attention Bottega Veneta, which has struggled over the past few years and saw a 1 percent decline in comparable sales in the first half of 2018. To fix things, Kering recently replaced creative director Tomas Maier with Daniel Lee, a behind-the-scenes figure from Céline, and is working on "resetting" its communications strategy.

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In the hopes of increasing profit margins further, Kering has spent the past year divesting of its sportswear and more contemporary-leaning brands including Puma, Volcom, Stella McCartney and Christopher Kane, to focus on its high-luxury fashion companies. Executives seem confident that's already paying off.

"Kering achieved dazzling top-line and earnings performances in the quarter and six months. Our growth, grounded in the exclusivity and desirability of our brands, is remarkably healthy," said CEO François-Henri Pinault in a statement. "The development model we implement across our Houses paves the way for increased value creation as well as profitable, sustained and consistent organic growth. While facing increasingly demanding comps and an uncertain global environment, we will once again substantially enhance our financial and operating performances in 2018."

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