NETHERLANDS: Gucci Results "Outstanding"
Gucci group highlights
- Group second quarter and first half net revenues up 90.5 per cent to $496.9m and 93.6 per cent to $1,027.6m, respectively.
Group second quarter and first half operating profit before goodwill and trademark amortization up 51.2 per cent to $83.4m and 43.4 per cent to $166.6m, respectively.
Group second quarter and first half diluted net income per share $0.80 and $1.26, respectively.
Gucci division highlights
Second quarter net revenues up 27.7 per cent to $333.2m.
Second quarter Directly Operated Stores sales up 36.0 oer cent to $226m.
Second quarter operating profit before goodwill and trademark
amortization up 53 per cent to $90.4m: an operating margin of
27.1 per cent.
August retail sales up 28 per cent.
In light of the outstanding first half results and continuing strong business trends, management reiterates its belief that the group will achieve full year diluted net income per share of at least $3.10.
Management further believes that the group will achieve full year revenues of at least $2.2bn and an operating margin before goodwill and trademark amortization above 17.0 per cent in the second half of 2000.
Domenico De Sole, president and CEO of Gucci Group N.V. said: "We have had an outstanding second quarter. The key has been the
extraordinary growth of Gucci Division. The Division's revenues advanced 27.7 per cent and it achieved an operating margin of 27 per cent, including a Division monthly record operating margin of 35 per cent in July. Gucci Division is reaping the benefit of our long-term commitment to disciplined brand management.
"We have limited doors to the best locations, invested wisely in our store personnel and image, and kept general expenses under control. The renewed economic strength in key regions, together with the great success of our recent product collections, has enabled us to realize powerful operating leverage.
"We have also enjoyed great success in the integration of our recently
acquired Divisions. Second quarter highlights have been the continuing
reorganization of Yves Saint Laurent Couture and YSL Beaute where we have made great strides towards achieving operating efficiencies in all key markets including France, Italy, the United States and Japan. Yves Saint Laurent Couture has continued its aggressive program to eliminate licenses and inappropriate product lines and distribution channels, while YSL Beaute has moved to reduce substantially sales to grey market channels.
"The response from the trade to these initiatives has been very positive.As planned, the management of our brands, Yves Saint Laurent, Sergio Rossi and Boucheron are pursuing numerous new store opportunities and we expect to make exciting announcements as we close deals in the coming months.
"I believe that we are well positioned for continued success through the remainder of this year and well into 2001."
In the second quarter, Gucci Division revenues advanced 27.7 per cent to $333.2m.
Outstanding merchandise, a modernised store format and strong response from local customers worldwide combined to increase sales substantially in each major market.
In the United States the second quarter revenue increase was led by 27 per cent growth in mainland retail sales and 22 per cent growth in Hawaii.
In Asia retail sales were robust in all major regions: Hong Kong up 29 per cent; Japan up 41 per cent (23 per cent in constant currency); and Korea up 46 per cent.
In Europe retail sales were up 42 per cent (39 per cent in constant currency), led by Italy up 45 per cent, France up 52 per cent, UK up 27 per cent.
The excellent 49.7 per cent growth in leather goods sales to $150.5m was realised across all product categories - handbags up 41 per cent; small leather goods up 58 per cent; and luggage up 88 per cent. Leather goods, which have one of the highest margins among Gucci's product categories, posted sales of $307.7m for the first half, representing 45.5 per cent of Division turnover.
The 15.2 per cent increase in ready-to-wear sales to $43.6m derived from double digit growth from both women's and men's ready-to-wear. This performance reflects the increased selling space dedicated to ready-to-wear, better customer service and Gucci's growing reputation as a ready-to-wear house.
The exceptional 49.2 per cent advance in jewelry sales in the second quarter to $13.2m reflects Gucci's success in building a contemporary style jewelry business.
Directly Operated Store sales increased 36 per cent, or 29 per cent in constant currency, in the second quarter to $226m, driven by the strong performance across all major markets.
Management considers retail performance outstanding given the partial closure for renovation and expansion of the Rome, Paris, Chicago, Houston and Ala Moana stores and the temporary relocation of the New York flagship during the second quarter. The 13,300 selling square feet New York store reopened on Labor Day, September 4 to great acclaim from customers and has generated $3.6m of sales in the first two weeks, up 130 per cent on the same period of last year.
Wholesale distribution turnover increased 17.2 per cent in the second quarter to $51.1m.
Timepiece distribution sales increased 5.3 per cent, or 11.6 per cent in constant currency, in the second quarter to $46.4m. The growth owed to strong customer response to the latest collection of Gucci watches.
The strong increase in the gross margin to 68.6 per cent in the second quarter 2000 from 66.3 per cent in the second quarter 1999 was due principally to excellent retail sell-through, a higher proportion of retail sales, a favorable product mix (robust leather good sales) and, to a lesser extent, favorable foreign exchange (weaker Euro).
Second quarter operating performance was one of the strongest on record. Operating profit before goodwill and trademark amortization of $90.4m amounted to 27.1 per cent of revenue, compared to 22.7 per cent in second quarter 1999. The July operating margin before goodwill and trademark amortization reached an unprecedented 35 per cent. Management attributes these outstanding results to a higher gross margin, operating leverage, improved store contribution margins and, not least strong cost control.
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