Gucci Group N.V. (NYSE and Amsterdam: GUC) announces today a series of acquisitions and alliances designed to press forward the Group’s multi-brand strategy and extend its direct control over the brands in its portfolio.
Gucci has reached an agreement with Schweizerhall Holding AG to acquire Boucheron International S.A., one of the world’s most prestigious and exclusive jewelry, watch and perfume brands.
Jewelry and watches form an important segment of the overall luxury goods market and demonstrate attractive growth and profit characteristics while remaining relatively fragmented.
Gucci believes that, under its ownership, the Boucheron brand has significant development potential, which it intends to exploit fully on a global basis.
This will be achieved by promoting the Boucheron brand image internationally; through extension of the jewelry and watch lines as well as expansion into other product categories; by enhancing the design content of the product portfolio; by expanding Boucheron’s retail footprint through the opening of directly operated stores in key luxury goods markets; and, through an expanded selective distribution presence on a wholesale basis worldwide.
Founded in France in 1858 with its flagship store on the Place Vendome in Paris, the world’s capital for haute joaillerie, Boucheron has a long established heritage as an international luxury jeweler and watchmaker.
The Company has built on its reputation for high quality and exclusivity by expanding into luxury fragrances with a product range (Boucheron and Jaipur) which is strongly identified with its jewelry creations. A new line is planned for launch this year in key markets. The company also has distribution rights of other fragrances in the United States.
Budgeted revenues for Boucheron for the current year are approximately US$85 million. Management expects the acquisition, which will be completed on 30 June 2000, to be earnings dilutive on a pre-goodwill basis until 2001.
Joint venture with FJ Benjamin Holdings Ltd
Gucci also announces, subject to regulatory approval, the creation of a new 65% controlled joint venture with FJ Benjamin Holdings Ltd., for the exclusive distribution of Gucci, Yves Saint Laurent Couture and Sergio Rossi products in Singapore, Malaysia and Australia.
The joint venture gives the Group direct control over the Gucci brand in these important markets. In addition, the company will operate retail stores for Yves Saint Laurent Couture and Sergio Rossi, which have not been directly represented in these markets.
FJ Benjamin has been the Gucci franchisee for over 20 years and has made an excellent contribution to building Gucci’s presence and brand awareness in the region. The joint-venture will combine FJ Benjamin’s knowledge of these markets with Gucci Group’s expertise and financial strength to further develop each brand’s directly operated store network.
The new company is expected to significantly improve the Group’s sales and profits in this region.
Mimi Pun, Managing Director of Gucci Hong Kong, China, Korea and Taiwan will be appointed as the joint venture Chief Executive Officer, reporting to Brian Blake, President and Managing Director of the Gucci Division worldwide.
FJ Benjamin operates 10 Gucci stores and total budgeted Gucci related revenues for fiscal 2000 of more than US$ 41 million. The joint-venture will commence on 30 June 2000, and is expected to be accretive immediately.
Domenico De Sole, President and Chief Executive of Gucci Group N.V.
said: “The transactions we are announcing today underline our determination to successfully pursue the growth strategies we set for the Group in the luxury goods industry. Our joint venture with FJ Benjamin Holdings and the acquisition of the Yves Saint Laurent licenses for jewelry, watches and shoes reinforces our control over production and distribution of our brands. These transactions offer great opportunities to exploit Group synergies and achieve further profitable growth.”
“The acquisition of Boucheron – De Sole added – extends our involvement in highly profitable product categories such as jewelry and watches, adds excellent luxury perfumes to our fragrance portfolio, and brings with it a new and entirely complementary skill base in fine jewelry, together with an outstanding management team.”
Gucci Group reports first quarter revenues of $ 530 million
Gucci Group announced today that revenues in the first quarter ended April 30 2000 were approximately $ 530 million compared to $ 270 million in the first quarter of 1999.
Revenues of the Gucci Division increased 27% to $ 342.9 million, reflecting an increase of 31.5% in retail turnover and a 38.3% increase in sales to franchisees, department and speciality stores and duty free operators.
Gucci Division retail sales performance was outstanding in all regions with US mainland up 34.5%, Europe up 29.2%, Japan up 37.5% and Hong Kong up 40.4%. Sales of all Gucci product groups increased, led by leather goods which were up 38%, ready-to-wear up 28% and jewelry up 132%.
First quarter revenues from YSL Beauté, Yves Saint Laurent Couture and Sergio Rossi were in line with management expectations.
The US Securities and Exchange Commission has informed the company that it interprets International Accounting Standards as requiring the Company to amortize goodwill and acquired trademarks over a period of 20 years rather then 40 years as originally planned. This accelerated write off is expected to increase annual amortization relating to the Yves Saint Laurent and Sergio Rossi acquisitions from $ 25 million to approximately $ 50 million, net of tax.
In accordance with International Accounting Standards, the Group estimates that in 2000 it will charge approximately $ 38 million of restructuring costs net of tax to the income statement relating to acquisitions made in 1999, approximately $ 32 million of which will be recorded in the first quarter 2000.
The Group expects annual after tax savings associated with these restructurings to be approximately $ 22 million a year beginning in 2001. Gucci notes that if it reported earnings under US GAAP, the restructuring charges would be accounted for as part of the cost of acquisition, thereby increasing goodwill, rather than as an expense.
Management estimates that Group operating income, before goodwill amortization and restructuring charges, will be approximately $ 82 million in the first quarter of 2000.
Management further believes that goodwill and trademark amortization will be approximately $ 14 million on a net of tax basis, and restructuring charges are estimated to be $ 32 million on a net of tax basis. Group net income will be approximately $ 45 million in the first quarter of 2000, corresponding to net income per share of approximately $0.45.
Regarding expected full year results, management previously expressed comfort that, prior to restructuring charges and assuming goodwill and trademark amortization calculated with a 40 year life, the Group could achieve net income per share of $ 3.45 for the full year 2000.
In a separate press release today, the Group disclosed the acquisition of Boucheron and the establishment of a 65% joint venture in Singapore, Malaysia and Australia. Based on the impact of the above-mentioned expected restructuring charges, the accelerated goodwill and trademark amortization period and the budgeted results of the newly acquired Companies, management now believes that the Group can achieve net income per share of approximately $ 3.10 for the full year 2000.
The Company expects to publish full first quarter results on June 21, 2000.
Domenico De Sole, President and Chief Executive Officer of Gucci Group N.V.
said: “I am extremely pleased with the truly outstanding sales and profit performance of the Gucci Division which reflects the success of our strategic initiatives, the appeal of our products and the buoyancy of the market. Our recently acquired companies are performing in line with our expectations.”
“We are disappointed by the SEC’s decision to require a twenty year amortization period for acquired intangibles; we are convinced that the Yves Saint Laurent and Sergio Rossi trademarks will yield strong profits for many years beyond the twenty year period.
The $ 3.10 estimate reflects the great strength of our core business. I would emphasize that excluding the effects of the restructuring, additional amortization, and new acquisitions our current estimate represents an improvement over the $ 3.45 estimate we published last March.”
Gucci Group N.V. is one of the world's leading multi-brand luxury goods companies. Through the Gucci, Yves Saint Laurent and Sergio Rossi brands it designs, produces and distributes high-quality personal luxury goods, including ready to wear, handbags, luggage, small leather goods, shoes, timepieces, jewelry, ties and scarves, eyewear, perfume, cosmetics and skincare products.
The Group directly operates stores in major markets throughout the world and wholesales products through franchise stores, duty free boutiques and leading department and specialty stores. The shares of Gucci Group N.V. are listed on the New York Stock Exchange and on the Amsterdam Stock Exchange.
Under the safe harbor provisions to the U.S. Private Securities Litigation Reform Act of 1995, the Company cautions investors that any forward-looking statements of projections made by the Company, including those made in this document, are subject to risks and uncertainties that may cause actual results to differ materially from those projected.
Factors that may affect the Company’s operations are discussed in the Company’s Annual Report on Form 20-F for 1998, as amended, filed with the U.S. Securities and Exchange Commission.
