(AOF) – Kering is in advanced discussions to buy the fashion brand Tom Ford, according to people familiar with the matter quoted by the Wall Street Journal. The French luxury group is in competition with rivals, including Estée Lauder, for the acquisition of the famous designer’s brand, but it seems to be the favorite and a deal could be concluded soon, according to these sources. There is no guarantee of a deal, they warned, and another side could still prevail.
The Wall Street Journal reported in August that Estée Lauder was in talks to acquire Tom Ford, in a deal worth $3 billion or more.
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Key points
– Luxury group born in 1963, owner of the brands Bottega Veneta, Gucci and Yves-Saint-Laurent;
– Turnover of €17.6 billion achieved 44% in Asia-Pacific, 26% in North America and 23% in Europe%;
– Luxury “pure player” business model, based on growth exceeding that of the markets, on the creative autonomy of the Houses, the pooling of support functions and cross-functional expertise and the digital transformation at the service of distribution and client ;
– Capital controlled at 41.74% (58.44% of voting rights) by the Artemis holding company of the founding family, François-Henri Pinault being Chairman and Chief Executive Officer of the 13-member Board of Directors and Jean-François Palus Director deputy general;
– Healthy balance sheet, with net debt of €942m at the end of June compared to €13.7bn in shareholders’ equity and operating cash flow of more than €2bn.
Challenges
– “Empowering imagination” growth strategy aimed at increasing the quality of products and the foundation of brands and controlling distribution, via e-commerce and the continued network of stores, with a focus on three activities:
– YSL: doubling of turnover and operating margin of +33% before 2030,
– Gucci: revenues of €35 billion and operating margin of +41%,
– Eyewear: revenues of €2bn, vs €706m in 2021 and operating margin of +15%;
– Innovation strategy on 3 pillars:
– investment in companies with innovative business models, MIL laboratories for sustainable alternatives in jewelery and textiles, use of blockchain to counter counterfeiting, etc.;
– robustness of logistics infrastructures serving the customer experience: Luce application on product availability, virtual offer based on data, internalization of sites, etc.,
– growth in e-commerce (13% of sales);
– 2025 “Care for the planet” environmental strategy, reported in an environmental income statement:
– reduce the group’s CO2 emissions by 50%,
– work on the environmental impacts of the supply chain (CO2 emissions, water consumption, air and water pollution, waste production and land use),
– create a “Sustainable Development Index of suppliers” and raise the traceability of animal welfare and the use of chemical products,
– promote “sustainable design”,
– create a Materials Innovation Lab (MIL) dedicated to Watches and Jewelry after that of fabrics and textiles,
– complete the compensation of CO2 emissions) for biodiversity;
– Diversification into eyewear with the purchase of the American Maui Jim.
Challenges
– Strong dependence on Gucci, 1st contributor to revenues and most profitable brand;
– Acceleration of growth and profitability of YSL and Bottega Venetta and recovery of sales of Gucci, handicapped in the 3rd quarter by the sluggishness in China and the United States;
– After a 23% gain in revenues at the end of September, anticipation of further growth in sales and turnover in 2022;
– Continuation of share buybacks until the end of the year.
big concerns
According to the Federation of specialized trade, Procos, activity from January to May is very significantly down compared to the same period in 2019, at – 8.8%. Store traffic in May 2022 remained lower than in May 2019, but the decline was limited to 6.5%, much better than in April (-19.6% compared to April 2019). In a very uncertain context, several elements weigh on the profitability of companies, in particular the increase in the cost of electricity and the indexation of rents, even if the composition of the ILC (commercial rent index) has been modified. Previously it was composed of 50% inflation, 25% construction cost index and 25% change in retail turnover. From now on, it will only take into account inflation and the cost of construction because the previous formula included sales made by the ‘pure players’ of the Net, which increased the rents of physical stores.