The luxury sector is growing rapidly. Take a look at our article for some key figures and information about Kering, a leader in the sector.
Web companies may make the fame of America, but luxury behemoths are the glory of France. The French domination of the luxury market is undeniable. In the top ten most valued brands, there are Gucci and Yves Saint Laurent, both owned by the Kering group. A name that needs no introduction: in 2020, Kering was crowned the second largest luxury group in the world. It proudly sits behind another French group in second place.
Kering is one of the flagships of the CAC 40, and had a return of 35.2% from 2016 to 2020. Investing in the company is appealing in view of its financial performance. But before making a decision, we suggest you take a look at some key information about this asset.
In 1962, François Pinault created the Établissement Pinault, a sawmill and wood trading company. Thanks to his business acumen, the company grew and was listed on the Paris stock exchange in 1988. Through the acquisition of other companies, it became Pinault-Printemps-Redoute. It joined the CAC 40 in 1995.
In 1999, the group acquired Gucci and Yves Saint Laurent to enter the luxury market. It gradually sold its other activities to concentrate on this market. Then came the acquisition of other prestigious brands such as Balenciaga, Bottega Veneta, and Boucheron.
In the meantime, François-Henri Pinault, the founder's son, took over the group. Under his leadership Pinault-Printemps-Redoute took on the name Kering. In 2020, Kering had a turnover of 13 billion euros and was the second largest luxury group in the world.
At the end of 2020, Kering owned 1,433 stores that it managed directly. These are located in Europe (313), North America (229), Japan (228) and in emerging countries (663).
Kering adopts a multi-brand strategy which, in its case, consists of buying well-known brands in its field of activity. This business model allows it to multiply its sources of revenue and to diversify its business segments. The group is notably present in fashion, jewelry, watches, leather goods and optics.
The effectiveness of Kering's business model is based on one major aspect: each of its brands has its own identity. For example, if a collector buys a Girard-Perregaux watch, it is because he knows the age-old know-how of this Swiss watchmaker. A fashionista who buys a Pomellato ring knows that the brand's jewelry is chic, and that the jeweler advocates for ethical and responsible fashion.
According to the Boston Consulting Group matrix, Gucci is Kering's "cash cow" brand. That is, it has a large market share in the luxury sector, and provides a significant portion of the group's revenue.
Breakdown of Kering's revenue by brand in 2019:
Breakdown of Kering's revenues by geographic area:
Kering was listed on the stock exchange at the time when it was still called Établissement Pinault. It joined the CAC 40 in 1995, and is still there. In 10 years (from March 2012 to April 2021), the share price has risen from €129 to €695, an increase of 438.75%.
Here are the group's stock market data:
First of all, it should be mentioned that Kering enjoys a good market positioning. First, it is number two in the luxury sector. Secondly, it has its best sales in China, where the number of millionaires in dollars has reached 1.317 million and where the number of newly rich people is growing very fast. Then there are the North American, Western European and Japanese markets.
It should also be noted that the luxury business is currently growing rapidly, due to wealthy people who are looking for rare and expensive items to differentiate themselves from others, including those from emerging countries who prefer to invest in luxury and collectible items (jewelry, watches, master paintings ...).
Another strength is Kering’s business model, which is based on acquisition and expansion. This strategy offers it a significant growth capacity. Moreover, it is necessary to monitor the new acquisitions of the group likely to reinforce its hegemony.
Finally, Kering's diversification strategy allows it to protect itself from the risks of the collapse of one business segment.
Firstly, Kering is highly dependent on the Gucci brand. A bad result could seriously weaken the group.
Secondly, the group remains under threat from a major competitor, namely LVMH. The latter has the same business model based on the acquisition of brands with strong potential. LVMH has managed to acquire Stella McCartney, a brand that was previously under the Kering umbrella.