French luxury group Kering delivered a forecast-beating rise in 2016 profits and sales on Friday, driven by the successful revival of its biggest brand, Gucci, and strong sales at Yves Saint Laurent.The strong showing provided further evidence of a recovery in the luxury goods sector, after rival LVMH posted record revenue and profits for 2016 and Hermes struck an upbeat note for 2017.
Recurring operating income for the year rose 14.5% to €1.886 billion ($2.01 billion) while group revenue rose 8.1% on a comparable basis to €12.385 billion .
This compared with €1.83 billion for profit and €12.28 billion for sales according to a Reuters consensus conducted with Inquiry Financial.
Gucci, under the leadership of designer Alessandro Michele and Chief Executive Marco Bizzarri since early 2015, has revamped its stores and adopted a vintage ‘geek chic’ look that has proved popular with customers and translated into higher sales.
SEE ALSO: Gucci owner meets Korea’s retail giants
Fourth quarter comparable sales at Gucci, which makes over 60% of Kering’s profit, rose 21.4%, beating analysts expectations of 13%. This was an acceleration from already stellar 17% growth in the third quarter. The performance was achieved despite Gucci’s decision to terminate markdowns in its stores, finance chief Jean-Marc Duplaix told a conference call.
Yves Saint Laurent, which accounts for over 10% of Kering‘s luxury sales, continues to progress with new designer Anthony Vaccarello at the helm since April. Its sales rose 20.5% during the quarter while the recurring operating margin of the division jumped over the 20% mark in the full year.
Bottega Veneta remained a weak spot with sales down 8.6% in the quarter. The brand has been hurt by a slowdown in Chinese tourist spending in Japan and Europe. There were, however, signs of an improvement in Chinese tourist spending in western Europe in the last quarter of the year, the group said.