* Kering buys Swiss independent watch market Ulysse Nardin
PARIS, July 30 Kering fulfilled its
ambition of expanding in Swiss watchmaking with the acquisition
of Ulysse Nardin, the French luxury and sports brand group said
on Wednesday as it posted mixed first-half results that showed
further weakness at its flagship Gucci brand.
Ulysse Nardin was one of the last remaining major
independent family-controlled luxury watchmakers in Switzerland
after more than a decade of consolidation led by rivals Swatch
Group, Richemont and LVMH, a race
Kering entered relatively late.
Created in 1846, Ulysse Nardin is based in one of
Switzerland's main watch production hubs, Le Locle, where
Swatch's Tissot and Richemont's Montblanc watch brand and LVMH's
Zenith are also located.
Kering, whose Gucci brand also makes watches, started
investing in 2008 in independent watchmakers Girard-Perregaux
and Jeanrichard. It bought control of the brands in 2011 and had
long since been hunting for new targets.
Ulysse Nardin gives Kering greater legitimacy and weight in
the watch making industry, analysts said, as the brand is one of
the country's few integrated producers, in terms of parts and
It will give Kering precious independence from the
industry's top supplier Swatch, which started whittling down
deliveries to its main rivals in recent years.
Kering Chief Financial Officer Jean-Marc Duplaix did not
give any financial details about the brand nor the deal. He
would only say that the group paid a multiple of "over 13 times"
annual earnings before interest, tax, depreciation and
amortisation (EBITDA) for it and that talks went "very fast" and
took place during the second quarter.
Ulysse Nardin, whose marine-inspired watches start at around
7,000 Swiss francs ($7,700), is estimated by industry experts to
make annual sales of about 250 million Swiss Francs and produces
some 30,000 units a year.
"It fits all our criteria, in terms of growth potential and
synergy potential for our other watch brand," Duplaix said.
Asked about the group's trading update, Duplaix said Gucci
had seen business recover in the second quarter in North America
after bad weather hits sales during the previous three months
but they had suffered in Hong Kong, Taiwan, Singapore and Japan.
Duplaix said trends remained negative in mainland China,
where Gucci was in the final phase of appointing a new chief
executive. However, he said business in China had improved since
the end of last year, notably in big cities.
In Europe, Duplaix said luxury consumption was "sluggish,"
which he attributed in part to a drop in traffic from Japanese
and Russian tourists and slowing spending by Chinese tourists.
Gucci sales, which many analysts had expected to remain flat
in the second quarter, fell 2.4 percent on a like-for-like basis
and were down 5.7 percent on a reported basis.
Last week, industry leader LVMH spooked investors with
below-forecast profits and a severe slowdown at Louis Vuitton,
whose sales growth collapsed to zero after enjoying a 9 percent
rise in the first quarter.
Duplaix said Gucci's same-store sales "were also slightly
negative" in the second quarter and the brand's operating margin
had lost 20 basis points in the first half against the same
period last year and was now 31.5 percent.
"This is a "good" miss, though, as it comes on the back of a
declining wholesale," Exane BNP Paribas analyst Luca Solca said
of Gucci's performance. "This probably means Gucci senior
management is continuing to improve the quality of the brand's
distribution, and weeding out questionable accounts."
However, Kering's total like-for-like luxury sales rose 5.2
percent during the period - beating analysts' forecasts of 3-4.5
percent - helped in part by strong growth at fashion brands Yves
Saint Laurent and Bottega Veneta.
Including revenues from Kering's sports brands,
second-quarter sales reached 2.35 billion euros ($3.1 billion),
broadly in line with market expectations.
Kering's German sportswear firm Puma on Tuesday
said sales of World Cup soccer boots and national team shirts as
well as new Arsenal jerseys beat its expectations as it reported
second-quarter earnings that fell less than feared.
"After a significant decline of 5 percent on the back of the
LVMH negative surprise, this should be a support for the Kering
share price," Solca said of the group's trading update and news
of its Ulysse Nardin acquisition.
(1 US dollar = 0.7476 euro)
(1 US dollar = 0.9092 Swiss franc)
(Reporting by Astrid Wendlandt; editing by Leila Abboud, David
Clarke and David Evans)