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Kering profits beat forecast, warns Trump's import tax would be detrimental
French luxury and sports brand group Kering (Euronext Paris: KER-FR) delivered a forecast-beating rise in 2016 profits and sales on Friday, driven by the successful revival of its biggest brand, Gucci, and strong sales at fashion house Yves Saint Laurent.
The owner of the Stella McCartney and Puma brands also vowed to further boost its operating performance and cash flow generation this year despite a world business environment it said remained uncertain.
Kering chief executive Francois-Henri Pinault expressed his concern that a tax on imported goods as suggested by U.S. President Donald Trump would have a negative impact on the group's outlook.
Trump has proposed a "border adjusted" tax (BAT) in an effort to create incentives for domestic production. Should the BAT be imposed by the new administration, it could lead to a 20 percent tax on imports for U.S. corporations.
"If it happens, of course, it is not good news," warned Kering chief executive Francois-Henri Pinault in an interview with CNBC on Friday.
However, Pinault projected that in any case Kering would be able to offset the likely detrimental impact of import duties with profits from the tourist spending.
"We depend to the extent of 40 percent on tourist flows in our business. So we will have a surge of American tourists going to Europe to buy luxury (products). So we will be able to offset a significant part of the bad news of having import duties on our products," he concluded.
The strong showing provided further evidence of a recovery in the luxury goods sector, after rival LVMH (Euronext Paris: MC-FR) posted record revenue and profits for 2016 and Hermes struck an upbeat note for 2017.
Recurring operating income for the year rose 14.5 percent to 1.886 billion euros ($2.01 billion) while group revenue rose 8.1 percent on a comparable basis to 12.385 billion euros.
This compared with 1.83 billion euros for profit and 12.28 billion euros for sales according to a Reuters consensus conducted with Inquiry Financial.
"Excellent end of the year for Gucci," said CM-CIC analysts.
Reuters contributed to this story.
