(AOF) – Kering has carried out a bond issue for a total amount of 1.75 billion euros. It is broken down into a tranche of 1 billion euros over 8 years with a coupon of 3.375% and a tranche of 750 million euros over 12 years with a coupon of 3.625%. This issue is part of the luxury group’s active liquidity management and contributes to increasing its financial flexibility.
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Key points
– Luxury group born in 1963, owner of the Bottega Veneta, Gucci and Yves-Saint-Laurent brands;
– Turnover of €20.4 billion achieved 33% in Asia-Pacific, 6% in Japan, 27% in North America and 27% in Europe;
– Luxury “pure player” business model, based on growth greater than that of the markets, on the creative autonomy of the Houses, the pooling of support functions and cross-functional expertise and digital transformation in 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 CEO of the 13-member board of directors and Jean-François Palus director delegated general;
– Healthy balance sheet: €14.8 billion in equity, €4.1 billion in cash and net debt of €2.3 billion.
Challenges
– “Empowering imagination” growth strategy aimed at increasing product quality and brand foundation and controlling distribution, via e-commerce and continued store networking, 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 €2 billion and operating margin of +15%;
– Innovation strategy on 3 pillars:
– investment in companies with innovative business models, MIL laboratories for sustainable alternatives in jewelry 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, etc.,
– growth in e-commerce (15% of sales in 2022);
– 2025 environmental strategy “Care for the planet”, 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 “Supplier Sustainable Development Index” and increase the traceability of animal welfare and use of chemicals,
– 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 and the new climate fund for nature;
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Eyewear boosted by external growth (€1.1 billion in sales with Lindberg Paui Jim, etc.).
Challenges
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Strong dependence on Gucci, the leading contributor to revenues and profits, hence investors’ concerns about the decline in sales 4
th
quarter 2022 in China and North America;
– Impact of reorganizations in the distribution networks, industrial investments made in 2022 (5.3% of sales) and the new beauty division, in charge of the cosmetics of the brands, excluding those of Gucci and YSL managed by Coty and L’Oreal;
– Public reception of the increase in sales prices;
– After a 15% increase in revenues, towards “profitable growth and strong profitability of capital employed;
– 2022 dividend of €14, after deposit of €4.5.
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Concerns remain
According to the Federation of Specialized Trade, Procos, in October 2022, activity fell by 1.5% year-on-year. However, the activity of beauty and health (+ 5.2%) and specialized food (+ 3.5%) are dynamic compared to October 2021. Attendance at points of sale was very impacted by the problems fuel and unfavorable weather. Compared to October 2019, a pre-covid year, the drop in attendance is very sharp (-20.9% in October). Shopping centers and the outskirts are more impacted than city centers with a gap of four to five points.
There are several reasons for concern for the future. The players are experiencing a very significant jaws effect given the increase in their operating costs while the evolution of demand is very uncertain. Very few brands can pass on the increase in their costs in sales prices. The federation therefore asks, among other things, to limit the indexation of the Commercial Rent Index to + 3.5% for the rents of all companies in 2023. It also invokes an absolute emergency: cap the price of energy for 2023 and retroact on contracts already signed to prevent the rate of failures from accelerating.