Will Kering Change Its Tune on Acquisitions?
This week, everyone will be talking about Gucci parent Kering's next move, fashion at Coachella and Allbirds entering China. Read our BoF Professional Cheat Sheet.
Kering Acquisition Chatter Ratchets Up
* Luxury conglomerate Kering reports first-quarter earnings on April 17
* Gucci generated 63 percent of revenue and about 80 percent of operating income for the group in 2018
* Kering is attempting to build Balenciaga and Alexander McQueen into billion-dollar brands alongside Saint Laurent
Every quarter, Kering reports Gucci's sales grew a little slower, and talk of the need for a major acquisition grows a little louder. To be sure, the brand is still running circles around most rivals, growing 28 percent in the fourth quarter. But Kering is a multi-brand conglomerate competing with the more-diversified LVMH. Saint Laurent, white-hot Balenciaga and McQueen may someday take the pressure off Gucci to perform, but a big acquisition would produce a new centre of value creation in a single stroke. Unfortunately for Kering, there are a limited number of targets — it would take a brand on the scale of Valentino, Prada or Chanel to move the needle, though the latter would be a big meal for the company to digest. There's also chief executive François-Henri Pinault’s aversion to bidding wars. It's unlikely for an offer to go uncontested, with so few independent luxury houses on the market and LVMH able to match Kering euro for euro. Plus a host of American, Chinese and Middle Eastern strategics and investment firms are potentially in the running.