Three major French-based luxury goods groups that are partly involved in footwear and apparel all reported good results for the six months ended June 30, in spite of the weaker US dollar, thanks in part to the opening of the Chinese market and to the launch of successful new leathergoods products. For two of them, LVMH and PPR, the results were dragged down by a poorer performance for their less elitist retail operations.
In Italy, Prada has announced a 23.2 percent increase in operating profit before amortization and depreciation to €97 million for the 1st half on 5.6 percent higher sales of €659.2 million. The results don’t include those of Church’s, which has been spinned off to an investment group, or those of Helmut Lang and Jil Sander, which are being reorganized.
The operating profit (Ebit) of LVMH’s fashion and leathergoods division rose by 4.5 percent, helping the group to reach an overall operating profit of €1,090 million, and thus passing the €1 billion landmark for the first time. All of LVMH’s divisions had strong growth in operating profits during the first half with the exception of wine and spirits. The group’s net profit grew by 19 percent to €559 million, and it would have risen by 38 percent without extraordinary charges related to the indefinite shutdown of the old La Samaritaine department store in Paris due to a fire hazard. As reported, total revenues for LVMH increased by 10 percent to €6,173 million.
Fashion and leathergoods chipped in with €654 million in Ebit on revenues of €2,196 million. Louis Vuitton was again a strong performer, particularly in Asia and Europe. The brand had success with the launch of its new lines, Monogram Cerises and Denim. Louis Vitton will reopen its flagship store in Paris on vastly expanded premises at the beginning of October. The year looks promising for Fendi, which had success in the first half with its new collections of leathergoods and the roll-out of the new store concept. Marc Jacobs and Pucci remain solid for the division.
PPR, parent company of Gucci Group, reported a 12.5 percent increase in net profit to €169.6 million on 3.1 percent higher overall revenues of €8.09 billion for the same period. Excluding extraordinary charges and based on comparable structures, the operating profit grew by 11.3 percent to €348.6 million, but the luxury division, represented essentially by Gucci Group, saw its Ebit jump by 76.4 percent to €107.4 million.
This performance indicated that Gucci has suffered no fall-out from the departure of the former CEO, Domenico De Sole, and its former creative director, Tom Ford. The Gucci division reached a record operating margin of 23.5 percent, thanks to higher prices. Bottega Veneta generated its first operating profit at €2.1 million, and Yves Saint Laurent reduced its losses. Robert Polet, the new CEO, is standing by his business plan, which includes among other things a return to profits for Sergio Rossi.
Offsetting in part these performances, PPR’s retail operations reduced their combined operating profit by 4.2 percent to €268.8 million. The main cause was the reorganization of a furniture chain, Conforma, but it seems that PPR’s department store chain, Printemps, did not do well either due to the tough French economic situation. The management continues to refuse any comments on rumors that PPR may want to sell it.
Margins increased also at Hermès during the 1st half of this year, as the net income grew by 11.9 percent to €109 million, in spite of an overall sales increase of only 4.6 percent to €649 million, and it would have risen by 18.6 percent if currency exchange rates had remained constant. Operating income grew by 12.8 percent to a margin of 26.4 percent of sales. With a better sales climate observed in Europe during the summer, and following a boost in production of leathergoods that should help satisfy Japanese customers, the group is now budgeting a sales increase of 8 percent for the full year.
The recovery of the European luxury goods market has been partly confirmed by Global Refund, which has registered a 3.1 percent increase in tax-free shopping in the continent for the first 7 months of this year, after two years of slowdown. Tax-free sales increased by 19.1 percent in France, 7 percent in Spain, 2.4 percent in the UK and 1.7 percent in Italy, but Germany and Austria continued to see big drops. The recovery was particularly strong in the summer. In Italy alone, a 15.6 percent increase was recorded in August.
Meanwhile, Jean-Louis Dumas has announced that he will retire next January after heading up the family-controlled Hermès group after 28 years. He is 67 years old and he has not been in good health lately. His son Pierre-Alexis Dumas will replace him as artistic director. Patrick Thomas, who doesn’t belong to the family, will take over the operational management after acting as joint CEO for the past year.