H1 2015 Results Roll In For Hermès, LVMH, Kering & Swatch Group
H1 2015 Results Roll In For Hermès, LVMH, Kering & Swatch Group
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Luxury
behemoths Hermès, LVMH, Kering and Swatch Group all recently released
figures for the first half of 2015 with mixed results and some
surprising insights.
Earlier this month, Hermès sent the luxury sphere into a frenzy when
it reported a sales rise of €2.3 billion ($2.5 billion) for its first
half, despite fears that the China slowdown would take its toll. The
figures for French fashion house, responsible for the iconic Birkin and
Kelly bags, were boosted by a 22 percent sales jump for its second
quarter, and while the company would not disclose profit for the period,
it stuck to its medium-term sales growth target.
While fellow luxury brands luxury goods brands have been feeling the
squeeze—including Burberry, which saw same-store sales contract in Hong
Kong after years of double-digit increases—Hermès was buoyed by its
thriving business in Japan, where it now operates 17 outlets across
various cities. Japan is rapidly becoming the premium choice for the
flock of Chinese shoppers turning their back on Hong Kong, and the
region’s pull has also contributed positively to Kering’s latest financials, along with LVMH Moet Hennessy, both of which recently released their first-half results in quick succession.
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Kering
posted revenue of €5,512.5 million in first-half 2015, up 17 percent on
a reported basis and up 3.5 percent on a comparable group structure and
exchange rate basis. Exchange rate fluctuations during the six months
had a positive impact on revenue and sales growth in mature markets was
once again buoyant (up 5.5 percent based on comparable data), driven by
Western Europe and Japan, while sales in emerging markets were stable.
Revenue generated outside the Eurozone accounted for 79 percent of total
consolidated revenue in first-half 2015.
Yves Saint Laurent was one of the brands strongest performers,
delivering strong sales growth in all main product categories and across
all regions. Specifically, first-half revenue growth rose 38.2 percent
on a reported basis and 24.3 percent based on comparable figures, with
sales picking up pace in the second quarter.
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Bottega
Veneta also posted first-half revenue growth of 19.7 percent on a
reported basis and of 6.4 percent based on comparable figures, with
sales also improving in the second quarter (up 9.3 percent on a
comparable basis).
Gucci experienced a sharp sales uplift, reporting €5,513 million in
first-half revenue, up 17.0 percent (up 3.5 percent on a comparable
basis). Again, Japan played a strong role, with sales in directly
operated stores in the region rallying sharply in the second quarter, up
19 percent. The boost contributed to the first sales rise for Gucci in
almost two years, and prompted a congratulatory remark and a nod to
Alessandro Michele’s new creative direction from François-Henri Pinault,
Kering’s Chairman & CEO, who commented:
“Kering delivered a sound performance in the first half of 2015,
buoyed by strong sales growth in the second quarter in a volatile
economic and currency environment. Our integrated, responsive business
model enables us to capture growth in the most dynamic markets. We are
particularly satisfied with the progress at Gucci and the positive
reception given to the brand’s new creative direction.”
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However,
Pinault also hinted at changes on the horizon at the luxury brand
conglomerate. “As we enter the second half of the year, I am fully
confident in the Group’s ability to combine strict management discipline
with organic growth at each of our brands,” he said. It seems the
celebrations might be short-lived for Gucci in particular.
Reports confirm that Kering has been demanding lower store charges in
Hong Kong and may actually begin to shutter stores there if it doesn’t
get its way. These decisions come as the brand struggles to balance the
island city’s waning appeal with wealthy Chinese shoppers since China
began taking measures against extravagance among government officials in
2012—but Gucci is not alone. According to Kering Chief Financial
Officer Jean-Marc Duplaix, the company has also started renegotiating
rents in Macau and mainland China as part of a wider plan to contain
costs.
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The
Chinese market was tough on fellow luxury giant LVMH Moët Hennessy
Louis Vuitton, this year with reports indicating sales declines in
China, Macau and Hong Kong. These dips, however, were offset by
improvements in Europe and United States and, overall, the world’s
largest luxury-goods maker reported its strongest earnings increase in
three years. The company recorded revenue of €16.7 billion in the first
half of 2015—an increase of 19 percent—but it was its smallest division,
watches and jewelry, that saw the most growth.
In the first half of 2015, the Watches & Jewelry business group
recorded organic revenue growth of 10 percent. On a reported basis,
revenue growth was 23 percent and profit from recurring operations
increased by 91 percent. Bvlgari was the stand-out—delivering an
excellent first half driven by the success of its iconic jewelry lines
and its new watch for women, Lvcea, while Hublot showed strong progress.
Meanwhile, TAG Heuer continued to refocus on its core offering and a
partnership was concluded between TAG Heuer, Google and Intel for the
launch of a smartwatch.
Photo Credit: MR. INTERIOR / Shutterstock.com
Yet,
despite this, the effects of the Chinese crackdown have still been
felt, and August 3 it was confirmed that the company will be shutting a
TAG Heuer store in Hong Kong as high rental costs and declining numbers
of customers weigh on profitability. As reported by Bloomberg and
confirmed by Jean-Claude Biver this week, the brand has decided to close
a store on Russell Street, one of the island city’s main shopping
thoroughfares. “Traffic has diminished and rents have stayed high,” he
stated.
The Swiss-headquartered Swatch Group
was also battered by its own market headwinds as a strong franc and
negative interest rates pulled its first-half net profit down by nearly
20 percent. Weakening interest in Hong Kong also impacted the world’s
largest luxury watchmaker, but growth still emerged, albeit slightly
muted. The group’s net sales overall were up 3.6 percent to CHF 4 248
million at constant exchange rates or 2.2 percent to CHF 4 192 million
at current rates. Calculated in euros, the Group grew by 18.7 percent.
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In
the Watches & Jewelry segment, including production, the Swatch
Group grew by 3.4 percent at constant exchange rates in comparison with
the declining export of wrist watches of the Swiss Watch Industry of—1.1
percent at the end of May. Group Management said it also expects a
strong second half of 2015. “The outlook for the Group in all regions
and segments remains very good. Despite the Swiss franc dilemma, Group
Management expects a strong second half 2015.
“Tourism in South Korea will stabilize again after MERS and sales in
Greater China and other regions will further increase in local currency.
For all brands, this growth will be supported by a high level of
marketing investment, an expanded retail network and also by the many
new product launches in all segments.”
Daniela Aroche
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