Gucci Owner Kering to Consider Buying Sports, Lifestyle Brands

Puma Suede trainers | Source: Puma

PARIS, France — Gucci owner Kering SA will consider acquiring sports and lifestyle brands in three years, as it assesses the performance of its Puma brand, Chief Executive Officer Francois-Henri Pinault said.

Any deal will hinge on Kering’s ability to reverse the fortunes of Puma SE, Europe’s second-largest sporting-goods maker, which has been undertaking restructuring measures since 2009, he said in an interview today in Hainan, China. Pinault, who’s also Kering’s chairman, said he was “convinced” the company should have a sports- and lifestyle-oriented business.

“When you look at the next 20, 30 years in terms of economic development of the world, the key markets are young people very much attracted by brands, very much aware of the health issues, attracted by sports,” he said in a Bloomberg Television interview today. “Luxury and sports are structurally, over a long period of time, growing markets.”

Kering is seeking new sources of revenue to offset slowing growth at Gucci, the Paris-based company’s biggest brand. Customers are switching to brands perceived to be more exclusive and Chinese President Xi Jinping’s campaign to curb extravagance damps luxury sales in the world’s second-largest economy. Gucci recorded the weakest quarterly sales growth in four years in the three months ended December.

Forever Faster

The French company will spend 70 million euros ($97 million) to strengthen its Puma label under a new slogan of “Forever Faster,” Pinault said. The 51-year-old ruled out selling the German sports brand.

“The portfolio of our sports brands is not finished,” Pinault said. “We’ve started it but until Puma is on track we won’t make any acquisitions. Let’s say two, three years from now, we will look again to try and strengthen that portfolio.”

The first signs of the marketing campaign’s success will come in September and October, when wholesale orders are taken, Pinault said.

Puma, 84 percent owned by Kering, reported on Feb. 20 that full-year profit declined more than analysts had estimated.

Kering has climbed 0.7 percent in Paris trading this year while the CAC 40 index has risen 3.7 percent in the period.

Kering is in the process of raising prices and tightening distribution at Gucci to elevate the appeal of its biggest brand. The strategy is taking a toll on its business in China, as the company slows the pace of Gucci store openings and reduces sales of entry-level luxury products, Pinault said at a post-earnings presentation.

Chinese account for more than one dollar in every four spent on luxury goods worldwide, Bain & Co. estimates.

Bottega Veneta

Kering will spend more money this year to market the results of its Gucci product revamp and won’t replace its creative director nor its chief executive officer, Pinault said.

The company, which owns other luxury labels such as Bottega Veneta and Yves Saint Laurent, is increasing sales of those brands as customers increasingly seek exclusivity in their purchases.

Bottega Veneta’s share of Kering’s sales was 9.7 percent in 2012, more than double the percentage in 2010, according to data compiled by Bloomberg. Yves Saint Laurent’s share also more than doubled in the same period, to 4.9 percent. Gucci accounted for 37 percent of revenue in 2012, compared with 24 percent in 2010, the data show.

Recurring operating income fell to 1.75 billion euros in 2013 from 1.79 billion euros a year earlier, Kering said Feb. 21. Revenue rose 0.1 percent to 9.75 billion euros.

Net income dropped to 49.6 million euros from 1.05 billion euros because of costs tied to the disposal of mail-order unit La Redoute and one-time charges at Puma. Excluding one-time items, profit fell 3.1 percent to 1.23 billion euros.

Liza Lin, Benjamin Haas, Stephen Engle with assistance from Christine Hah; Editors: Stephanie Wong, Lena Lee, Suresh Seshadri