Source: Company reports/Fung Global Retail & Technology

FY16 Results

French luxury group Kering reported FY16 revenue of €12.4 billion, up 6.9% year over year and above the analyst consensus estimate of €12.3 billion. At constant currency, revenues increased 8.1% year over year. FY16 gross margin expanded by 180bps year over year and operating margin expanded by 100bps to 15.2%. FY16 EPS of €10.17 increased 26% year over year and beat the analyst consensus estimate of €9.93.

Sales Breakdown by Segment and Brand

• Luxury Activities: This segment’s revenue jumped by 7.8% on a constant currency basis to €8.5 billion in FY16. Revenue growth in directly operated stores increased 10.3% year over year, with Asia-Pacific and Western Europe reporting the strongest sales of 13.6% and 13.0%, respectively. Online sales increased over 20% year over year.
• Gucci: Sales climbed by a robust 12.7% year over year at constant currency, driven by sales in directly operated stores, which grew by 14.8%, and Gucci e-commerce sales, which increased by 19% in FY16.
• Bottega Veneta: Brand sales declined by 9.4% on a constant currency basis, impacted by slower tourism in Western Europe and Japan.
• Yves Saint Laurent: Sales rocketed by 25.5% year over at constant currency, driven by strong growth across all regions and all product categories.
• Other Luxury Brands: The other brands slightly increased overall sales growth by 0.3% at constant currency. The Balenciaga, Stella McCartney and Alexander McQueen brands reported positive sales momentum. Watches continued to be weighed down by a difficult market for timepieces.
• Sports and Lifestyle Activities: The Sports and Lifestyle Activities segment’s revenue jumped by 9.0% on a constant currency basis to €3.9 billion in FY16. Sales of Puma grew by 10.4% on a constant currency basis. The brand achieved good sales growth across all geographic regions. Puma footwear sales increased 12.7% year over year and apparel sales also climbed 9.6%. Volcom's sales increased in directly operated stores in FY16, but revenues were held back by a challenging operating environment for US wholesalers.

4Q16 Results

Kering reported 4Q16 revenue of €3.5 billion, up 10.4% on a reported and constant currency basis. Gucci brand sales in 4Q16 jumped by 21.4% and Yves Saint Laurent 4Q16 constant currency sales increased 20.5% year over year. Puma brand footwear sales jumped 17.7% year over year in 4Q16.

Outlook

FY17 revenue consensus estimates stand at €13.2 billion, implying annual year-over-year growth of 6.8%. Consensus expects operating profit of €2.1 billion, implying year over year growth of 10.6%. Consensus expects FY17 EPS at €11.52, implying growth of 13.3% year over year.