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PARIS (Reuters) - Luxury group Kering struck a bullish note for this year despite rising inflation after a strong comeback by its star brand Gucci in late 2021, and said it could make an acquisition soon to boost its portfolio of labels.
The luxury industry has fast recovered from the fallout of the coronavirus pandemic, with sales for most groups now exceeding their pre-crisis levels, and thanks to strong demand has room to further increase prices in the face of rising costs.
Sales at Kering - whose brands also include Yves Saint Laurent, Bottega Veneta and Balenciaga - jumped by nearly a third in the last three months of 2021 to 5.41 billion euros ($6.14 billion), powered by a surge of the same magnitude at Gucci that was almost double a 17% average analyst forecast.
The strong showing by Gucci after a disappointing third quarter is a big relief for Kering - the label accounts for 60% of its revenue and around 70% of its profit.
After cutting advertising as the pandemic struck in 2020, Kering increased marketing spending to boost Gucci in 2021 and this paid off particularly in the final part of the year, with the arrival of the new Aria collection in stores.
A broader offer and a sharper focus on high-end fashion and accessories - executives said the average sale price for Gucci had increased substantially - were behind the revenue surge, with U.S. and Chinese growth driving sales.
The release in November of Ridley Scott’s film “House of Gucci”, although not directly linked to the brand, also helped increase the visibility of its designs.
Chairman and CEO Francois-Henri Pinault said Gucci, which enjoyed stellar growth in 2015-2019 but has since been under market scrutiny as its momentum slowed down, had started the new year in line with the solid trend seen at the end of 2021.
The group’s other brands also did well. Yves Saint Laurent, its second-largest label, saw fourth quarter revenue rocket 47%.
Pinault gave his strongest indication yet that Kering, which had a free cash flow of nearly 4 billion euros in 2021 and almost zero debt, may soon embark on a takeover.
“For sure, acquisitions could make sense in the near future for the group,” he said.
Fuelled by its reliance on Gucci, speculation has swirled that Kering might contemplate major purchases to diversify its portfolio - especially as larger rival LVMH last year expanded with its $15.8 billion purchase of U.S. jeweller Tiffany.
Kering’s finance chief Jean-Marc Duplaix said Gucci - which increased prices twice in 2020 and in 2021 - would again raise prices in a “targeted manner” this year, and flagged price increases for the group’s other labels too.
He said that despite higher raw material and transport costs, the group was confident it could keep improving its profitability. Rival Louis Vuitton lifted prices this week to protect margins.
($1 = 0.8807 euros)
Reporting by Mimosa Spencer and Silvia Aloisi; Editing by Kenneth Maxwell and Susan Fenton
