Gucci's sales declined in the Asia-Pacific region for the first time in many years in 2013, but executives of Kering, the French-based parent company of the brand, said that the growth of the luxury goods market in that country is not at all finished. Rather, while some Chinese customers continue to look for aspirational products by the big brands, others are looking for more exclusive items.
In China, Gucci has raised the proportion of the products it offers without its logo to 40 percent in line with this evolution of the market. An improvement was observed in the fourth quarter for the brand in China as well as in South Korea.
Largely because of the repositioning of its offer and its store network in China, Gucci's total sales fell by 2.1 percent last year to €3.56 billion, with footwear representing 14 percent of the turnover, but they generated a record operating margin of 31.8 percent because of the continuous upgrading of the collections. An even higher margin of 32.5 percent was reached by another Kering brand, Bottega Veneta, whose sales grew beyond the €1 billion threshold.
Together, Gucci and Bottega Veneta generated 71 percent of the sales and 87 percent of the profits of Kering's luxury goods division, which grew by 4.4 percent to €1,682.6 million, representing an operating margin of 25 percent. The division's sales increased by 4.2 percent to €6.47 billion, but grew by 7 percent on a currency-neutral basis, with a slightly higher increase of 7.4 percent in the fourth quarter. Shoes represented 12.9 percent of the division's turnover.
On a comparable basis, Saint Laurent grew by 21.6 percent for the year and by 42 percent in the last quarter. Last year it generated an 18 percent higher operating profit of €77 million on sales of €557 million, driven by its men's and women's apparel collections. About 22 percent of the brand's sales were generated by footwear.
Other luxury brands raised their sales by 11.3 percent to €1.34 billion, with progress in all of them, but Sergio Rossi was not mentioned among the best performers. At the end of 2013, Sergio Rossi had 53 directly operated boutiques, representing more than half of its total sales, and their sales enjoyed solid growth last year. Kering says the brand will continue to strengthen its wholesale business, especially through long-term franchise agreements and distributors.
Across the Luxury Division, Asia-Pacific was the worst region for the group on a comparable basis, with sales declining by 4 percent on a comparable basis. In contrast, they grew by 9 percent in Western Europe and by 7 percent in North America.
With Puma and other sports and lifestyle brands reporting lower profits, Kering's continuing operations suffered a drop in net income of 3.1 percent to €1.23 billion on stable sales of €9.75 billion. The operating margin before amortization (Ebitda) declined to 21.0 percent from 21.2 percent in the previous year.
However, the group's actual net profit plunged to a level of only €50 million from the previous year's level of €1,048 million including losses and extraordinary charges of €822 million related to the disposal of retail operations such as Fnac and La Redoute.
The company plans to launch dedicated action plans for each of the brands in its Luxury Division, including those that it has recently acquired. It is forecasting higher sales and operating profits in 2014.