Kering (KER) Q2 2024 earnings summary

Executive summary

• Group revenue for H1 2024 was €9,018 million, down 11% year-over-year on both reported and comparable bases, with all major brands except Bottega Veneta and Kering Eyewear posting declines amid a challenging luxury market.

• Recurring operating income fell 42% to €1,582 million, with a recurring operating margin of 17.5%, and net income attributable to the Group dropped 51% to €878 million.

• The group is focused on executing its long-term strategy, investing in brand desirability, exclusivity, and supply chain control, while reigniting top-line growth through product, communications, and distribution initiatives.

• Significant real estate acquisitions in New York and Milan, and a €1.75 billion bond issue, were completed to secure flagship locations and enhance liquidity.

• The outlook anticipates recurring operating income in H2 2024 could decline by about 30% versus H2 2023 due to ongoing market uncertainty.

Financial highlights

• Gross margin declined by nearly 200 basis points to €6,708 million, with EBIT margin down over 9 percentage points to 17.5%.

• EBITDA margin fell by about 7 percentage points to 28.8%, with EBITDA down 28% year-over-year to €2,595 million.

• Free cash flow from operations was €1.9 billion excluding real estate acquisitions; including these, it totaled €1.1 billion.

• Net debt increased to €9,922 million as of June 30, 2024, from €8,504 million at year-end 2023.

• Basic earnings per share for H1 2024 was €7.16, down from €14.60 in H1 2023.

Outlook and guidance

• Recurring operating income in H2 2024 is expected to decline by approximately 30% compared to H2 2023, reflecting ongoing demand uncertainties in the luxury sector.

• Revenue trends are expected to gradually improve in H2, with a back-end loaded recovery, especially at Gucci.

• The Group will continue to prioritize long-term investments in its Houses while optimizing its cost structure in response to current market conditions.

• No expectation for margin improvement in H2 versus H1 due to ongoing market uncertainty.

• Continued strict allocation of opex and capex, with investments in A&P, stores, and efficiency measures.