Gucci And BV Helped Grow, But Opening Cloud Began To Postpone Investment In China'S Market.

Paris, France - driven by Gucci and Bottega Veneta, Kering opened its fourth quarter in 2019 and exceeded its forecast for the year, and its annual sales exceeded 15 billion euros.

In the fourth quarter, group revenue grew by 11.4% to 4 billion 400 million euros, which is higher than 9.7% of analysts forecast by Bloomberg. Jean-Marc Duplaix, chief financial officer, said that although the group's sales in Hongkong had dropped by 50%, the steady growth in mainland China has already made up for most of the losses. Therefore, the group's quarterly performance is broadly in line with the previous quarter. At this very moment, the earnings report also raises the following questions.

Gucci and BV helped grow, but opening cloud began to postpone investment in China's market.

　 Will Gucci's star halo disappear?

Gucci has been the cash machine of Kai Yun group. Through a series of advertising campaigns and diversified activities, it succeeded in boosting the US market performance. The fourth quarter sales grew by 10.5%, which exceeded analysts' expectations. Brand annual revenue increased to 9 billion 600 million euros, accounting for 83% of the group's recurrent operating income. But it is still slowing down compared with the 36.9% growth rate in the same period in 2018. Moreover, Gucci paid a record tax of 1 billion 250 million euros in Italy, resulting in the group's net income plunging 37.4% to 2 billion 310 million euros in 2019.

Analysts and investors are worried whether the group's growth is too dependent on Gucci, and whether the long rumored rumors will really come true and help open the cloud to find the next heavyweight brand. The news said Kai Yun had considered buying Italy fashion brand Moncler last year. Citibank analyst said: "whether Gucci can enter a more stable growth stage and become a continuously attractive" rocking Qian Shu "will be the key to the development of Kai Yun group. Especially in the absence of large-scale transformation or mergers and acquisitions.

Gucci and BV helped grow, but opening cloud began to postpone investment in China's market.

Has Bottega Veneta proved himself?

Since Daniel Lee joined Bottega Veneta, the brand is highly valued by the group and the market. Thanks to the good market reaction of the new series, the brand has regain momentum and the annual revenue has increased by 2.2% to 1 billion 170 million euros.

The brand has successfully captured a number of modern female users who have lost Celine after the departure of Phoebe Philo. According to the search index report released by fashion search engine Lyst, the search volume of the brand increased by 32% in the fourth quarter of last year, ranking 2 to fourteenth in the list of the world's hottest fashion brands.

At present, Bottega Veneta Pouch "cloud" bag, Arco handbag and color Muller shoes have become the world's net red products, and are often sold out. On the other hand, it shows that Bottega Veneta should help the group grow further, and we must overcome the relative shortage of capacity and sales terminals.

In the 2019 fiscal year, there were 268 stores in Bottega Veneta, far less than 487 in Gucci. In addition, the financial report also pointed out that in fiscal year 2019, Bottega Veneta sales accounted for 83% of the total leather products, and Lee still has room for improvement in garment performance.

Gucci and BV helped grow, but opening cloud began to postpone investment in China's market.

　 Who needs to work hard and who is a dark horse?

Compared with the luxury group LVMH, whose sales increased by 15% in 2019, Kai Yun group achieved a 16.2% higher growth rate, and its annual revenue has reached a record 15 billion 880 million euros. After the disassembly of its sports apparel brand Puma in 2018, the group is committed to developing its luxury brand business.

However, other brands of the group perform differently. Yves Saint Laurent, which has performed well in Western Europe and North America, has increased 14% to 2 billion 50 million euros a year, supporting Gucci and Bottega Veneta in its annual performance. Its success has been attributed to the commercial leadership of the new CEO Francesca Bellettini and the product and artistic collaboration of Anthony Vaccarello, the creative director.

Other brands such as Balenciaga, Alexander McQueen, Brioni, Boucheron (Bucheron) and Qeelin have been classified as the same category in their earnings reports due to their relatively small volume of business. The total revenue was 2 billion 538 million euros, an increase of 20.34%. Among them, Balenciaga, the creative director Demna Gvasalia, left her own brand and focused on the creation. In July this year, it will re launch its advanced custom series, which is expected by the industry.

In the category of jewellery and watches, apart from the old brand, Tiffany will face fierce competition with LVMH acquisition of Tiffany & Co., and the fluctuating market environment will also bring challenges. In the 2019 fiscal year, the income of watches increased by 1% compared with that of the previous year, while jewellery increased by 12%.

Gucci and BV helped grow, but opening cloud began to postpone investment in China's market.

　　 How to deal with the epidemic crisis in Chinese market?

In the earnings conference, analysts are still most concerned about the Chinese market. Mainland China is currently the third largest market of Kai Yun group, which accounts for 11% of total revenue by 30 billion of revenue. Last year, it was ranked first in all markets, at a rate of 30%, not to mention the contribution made by Chinese tourists to other markets.

At this time, the outbreak of new coronavirus, which has hit many luxury brands, has also become one of the key factors affecting the future performance of the open cloud. The group said that the epidemic will have a very big impact on China's main market, and "consumption trends, tourism flows and economic growth capabilities" will change.

For this reason, the group has temporarily closed half of its brands in China, reduced the operating time of remaining stores, and shelved new store activities and advertising. Fran and ois-Henri Pinault, chairman and chief executive officer, said: "the group is redistributing its inventory to other countries and regions to ensure that we do not have backlog in China."

"Because of the constant changes in the current situation, it is still impossible to fully assess the impact on group performance and the speed needed to restore performance in the future," Pinault said. "I don't want to guess. But we hope that once the emergency is over, everything will soon return to normal. We hope to be prepared and in a favorable position at the beginning of the rebound. "

Despite many uncertainties, the good performance in 2019 made the group "confident in its long-term growth potential". Market analysts are also observing the group's future development. "The fourth quarter performance of Kai Yun group is excellent, but we need more information about how to solve the problems in the current Chinese market," wrote Flavio Cereda, a Jefferies market analyst.

Kai Yun group's share price rose 3% in early trading.