In Depth, These Brands Should Be Included In The Takeover List Of Kai Yun Group.

In recent years, the French luxury giant Kering has achieved great success with its brand Gucci, Saint Laurent and small but fast-growing Balenciaga, and its sales, profits and market capitalization have increased steadily.

According to the group, Balenciaga's sales this year will exceed 1 billion euros (US $1 billion 100 million).

The group also adjusted the brand layout: separate the Puma independently, sell Volcom, and draw a line with the Sergio Rossi, Christopher Kane, Stella McCartney and other small and medium-sized designer brands.

In order to maintain a strong momentum of development, Kai Yun group must continue to expand the sales scale of Gucci, Saint Laurent and Balenciaga, while developing Alexander McQueen which is still in the secondary scale.

In addition, it also needs to reform Bottega Veneta, although the brand earned 1 billion 100 million euros (US $1 billion 200 million) in 2018, but it has been in a state of stagnation after nearly 20 years of expansion.

Kai Yun group has renovated the Boucheron jewelry store in Place Vend me, and is also trying to maintain the steady development of Italy menswear brand Brioni. Over the years, the brand has been faced with the problem of how to innovate.

Each of these tasks is not easy.

Kai Yun group's five largest brands in 2018 accounted for the total income (total revenue of 13 billion 700 million euros). Photo source: BoF

In 2018, Kai Yun set a 13 billion 700 million euro (US $15 billion 300 million) sales, an increase of 26% over the same period last year.

But this achievement depends to a large extent on the excellent performance of Gucci.

Thanks to the disruptive innovation strategy developed by CEO Marco Bizzarri and creative director Alessandro Michele, sales generated by Gucci account for more than 60% of the group's total.

Although Gucci continues to grow at a two digit rate, its growth rate slowed down significantly compared with the first quarter of 2018. Sales in the first quarter of 2019 were 2 billion 300 million euros ($2 billion 600 million), an increase of 20% over the previous year. But in the first quarter of 2018, the sales volume of the Italy fashion brand was even more shocking, with a growth rate of 49%.

Anthony Vaccarello, the creative director of Saint Laurent, basically extends the aesthetic style established by former director Hedi Slimane, but the brand must now face the rise of Celine under Slimane.

McQueen is relatively weak in accessories, so we need to further develop a series of handbags and shoes that are iconic, which can attract consumers to repeat purchases.

Although Balenciaga has launched the popular retro sneakers under the leadership of creative director Demna Gvasalia, and this shoe has made a great contribution to the growth of performance, the upsurge that has triggered is fading away.

At the same time, the group decided to carry out a brand pformation plan for Bottega Veneta, Boucheron and Brioni, and it will take some time.

In order to continue to create shareholder value, Kai Yun may need to take advantage of its strong purchasing power, at least initiate a takeover case (if not too much).

Based on the group's 4 billion 400 million euro ($4 billion 900 million) EBITDA (tax profit depreciation and amortization profit) in 2018, analysts estimated that its purchasing power was between 130 and 18 billion euros ($20 billion 200 million).

"The group has never had such ample cash flow in history," said John Guy, an analyst at MainFirst.

"Kai Yun has made it clear that they will not wait for the market to integrate themselves, but will participate in some form of mergers and acquisitions."

Kai Yun group has made it clear that they will not wait for the market to integrate itself.

At the investor telephone conference in February 2019, Fran ois-Henri Pinault, CEO of Kai Yun group, also stressed this point: "the funds we can use for mergers and acquisitions are not only very abundant, but the amount is still growing steadily.

Therefore, we are fully capable of seizing opportunities. "

But he also points out that the group will give priority to the development of existing brands including Qian Shu Gucci.

"We do not need to achieve growth through mergers and acquisitions, and there is no need to do that," he added.

"In the past three years, even without any mergers and acquisitions, our performance has also increased significantly.

We have our own way of operation and platform.

But if there are mergers and acquisitions that meet the investment criteria, we can also take them at a more realistic price.

We don't fight price wars, but we've never done that before. "

However, any paction made by Kai Yun group will be subject to strict scrutiny by the market.

"Investors are very tired when it comes to takeover," Guy said.

"They are always overpaying, but have not yet received substantial returns.

On the other hand, the group has many assets handling records.

In addition, Kai Yun has many "soft luxury brands" (soft luxury, usually refers to the sale of high-end clothing and leather products, plates), can make a big deal in this regard.

Thomas Chauvy, an analyst at Citigroup (Citigroup), said in a recent report that while Kai Yun group is likely to prioritize organic growth (organic growth, which means that companies rely on existing resources and businesses, get a natural increase in sales revenue and profits by improving product quality, sales and services leveling, expanding customers and expanding market share, promoting innovation and improving production efficiency), but "as long as there is a standard opportunity, the group is still open to acquisitions".

Chauvy adds that no matter what kind of takeover, it will bring about changes in the scale of enterprises, while Kai Yun is now "over dependent on Gucci" and has encountered many difficulties in the integration of medium-sized brands in the past.

According to the "2019 global fashion report" released jointly by BoF and McKinsey (State Of Fashion 2019 Report), opening the cloud should not only consider whether the brand of merger can complement the existing brand portfolio in business mode and aesthetics, whether it is easy to join the group's supply chain and logistics platform, and whether it can create greater development opportunities in China. China will become the world's largest fashion market this year.

Chauvy also said that the target of mergers and acquisitions must have a reasonable valuation, without major restructuring or brand pformation.

However, there are few companies with all these characteristics.

According to people familiar with the matter, Kai Yun group had considered buying Versace, but finally thought the Italian company and its investors, private equity firms Blackstone, were too expensive.

(Kai Yun did not comment on the matter).

It may also be possible to establish some kind of cooperative relationship with Chanel, possibly in the form of merger - but this is a distant idea.

If the alliance with Richemont, a Swiss luxury group, is likely to be welcomed by the market, the group has the management experience of "hard luxury" (hard luxury, watches and jewellery, etc.), which is lacking in the cloud, and at the same time, it can make use of the expertise of the cloud in the aspect of time to develop Chlo.

But because of the uncertainty of the balance of power between Pinault and Johann Rupert, the idea may not be realized.

Italy leather goods manufacturer Tod 's may also have the intention to sell, but the brand leader Diego Della Valle has a close relationship with Lu Wei Mo Xuan, which means that if he intends to sell the brand, she may very well choose to contact the latter's chief executive, Bernard Arnault.

In addition, the global well-known brand Armani also has strong attraction for the acquirers.

However, the company has always lacked products with marginal effects in its accessories, and its founder, Giorgio Armani, has repeatedly said there is no plan to sell, or even set up a charitable trust fund to make it difficult for external entities to acquire the company in the future.

Even so, there are still some opportunities in the market, though not many, but it seems to meet most of the needs of Kai Yun group.

VALENTINO

In 2012, Mayhoola For Investments, a Qatar Royal Investment Agency, bought the Italy luxury brand for $850 million, suggesting that the agency may have been ready to build its own luxury kingdom.

In 2016, the agency stepped up its efforts to strengthen the conjecture: Ho sold nearly 500 million euros (US $559 million 800 thousand) in one attempt to acquire Balmain, which is equivalent to 14 times its own EBITDA.

But at the end of last year, there were rumors that the group might be interested in selling Valentino.

In 2018, Valentino's sales amounted to 1 billion 200 million euros (US $1 billion 340 million), up 3% from 1 billion 160 million euros (US $1 billion 300 million) in the same period last year.

Kai Yun, Mayhoola and Valentino did not comment on this rumor.

But the insider thought it was purely a market hype and they strongly denied that similar dialogue had happened.

According to an insider familiar with Mayhoola, the company is still very committed and intends to take a long-term consideration in its acquisition.

According to the person familiar with the matter, although Mayhoola sold shares in the British handbag brand Anya Hindmarch, it has nothing to do with its master plan.

However, there is still the hope of buying Valentino in the market.

Advantage: as a world-renowned brand, Valentino has a strong tradition and strong accessories product line.

Pierpaolo Piccioli, the creative director of the brand, has been highly loved by critics, celebrities, stylists and other designers. They often use Piccioli's works.

Piccioli's vision is different from other brands of Kai Yun group, which will help reduce the risk of "cannibalism" among brands.

On the other hand, open cloud has a mature market base, including multiple supply channels, huge retail network and a large number of top management talents. These advantages can help Valentino accelerate growth.

In December 2018, Kai Yun cooperated with Alibaba to promote China's sales performance.

Disadvantages: in recent years, as the Valentino accessories product line still relies on past hot products such as "Tango" series ankle strap high heels, "Open" series of white sports shoes and "Rockstud" series, its performance growth is slowing down.

If we want to take M & A, we also need to consider how long the Piccioli commitment will last for the brand.

Although Valentino is still a good acquisition target for Kai Yun group, considering the attitude of Mayhoola, it may cost a lot to complete the acquisition.

MONCLER

The performance of the Italy luxury clothing brand grew rapidly, and it hit 1 billion 420 million euros (US $1 billion 590 million) in 2018, an increase of 22% over the previous year.

To a certain extent, the success of the brand is closely related to the pformation of its business mode -- no longer the main seasonal series, instead of working with the top creative people to launch the "Moncler Genius" capsule series which is easy to promote in Instagram.

The series not only quickly enhanced brand awareness, but also successfully attracted a large number of new customers.

In 2018, about half of the customers who purchased Genius series from the Moncler store were new customers of the brand.

Advantage: Moncler is complementary to Kai Yun group in many ways.

Kai Yun can learn from its "Limited sales drive" (drops-driven) mode and apply it to other brands.

At the same time, the main product of Moncler is down jacket, which is not only different from the existing costumes of Kai Yun group, but also a long series of long-term profits that can reduce the risk of mergers and acquisitions.

Moncler's brand reputation in the world is another advantage, especially for China's important market.

In addition, the brand still has development potential and can go beyond the field of coats.

Kai Yun group can use this expertise to help Moncler's future development.

Disadvantages: Moncler's chief executive, Remo Ruffini, has led the brand to a number of sales spree, bringing the company from bankruptcy to final listing.

Given that he still owns 26% of the shares, the company's performance is growing at a speed of two digits. He may not intend to sell the brand at present.

"In my opinion, selling brands is like a shame now," he said in an interview with Reuters (Reuters) in April.

He also mentioned that he hoped to witness the development of the brand in the next three to four years.

Ruffini has become accustomed to running Moncler independently, and it does not seem to need assistance from another level of executives.

TIFFANY & CO.

Tiffany & Co. is one of the few independent jewelers.

Analysts believe that the board of directors of the company is sometimes too conservative in brand development and has long regarded the US company as a takeover target.

At present, the brand has a high market value of up to $13 billion, and its brand attractiveness and recognition in the world are second to none.

In the 2018 fiscal year, the brand's revenue reached US $4 billion 400 million, which is enough for other companies to have confidence in the brand's future.

Advantage: Tiffany owns the business scale of Kai Yun group, especially because the latter does not have a famous brand in the field of jewelry.

(the group's largest jewellery brand, Boucheron, is still small and is undergoing reform.)

Tiffany's performance is good, and its growth is booming in Asia. In 2018, its sales in Asia accounted for 28% of the total, up 13% over the same period last year.

In addition, the brand's chief executive, Alessandro Bogliolo, is Italian, who has worked in LVMH's brand Bulgari, Sephora and Diesel for many years, and has a deep understanding of the luxury industry in Europe.

Disadvantages: the location of Tiffany varies: in addition to selling six premium jewelry, it also sells $60 silver necklace.

The inconsistency of positioning results in the fact that consumers can not always regard the brand as a pure luxury.

Kai Yun group has also made it clear that it does not want to deviate too much from its core position in the luxury sector.

"Tiffany is not Cartier," Guy said.

"It is made up of two brands and belongs to dual positioning (Jekyll-and-Hyde), from the book" Dr. incarnation ", and later became the" dual personality "of psychology, but some investors are hard to accept such brand positioning.

In addition, Tiffany is learning how to control the market that is reshaped by consumers. Nowadays, the relationship between customers and traditional jewellery (and diamond engagement ring) is far less than before.

Although Tiffany still has great room for development in China, it must compete with other famous fashion group's fine jewellery series, as well as the brand that runs directly in the consumer mode (DTC), to deal with the impact of the increasingly sought after designer brand.

Many analysts believe that although Tiffany has expressed its desire to remain independent in the past, LVMH is more likely to buy the brand.

The latter not only has a stronger purchasing power, but also a network composed of 70 brands, making it diversified in terms of pricing and target customers.

CHLO e

Although the Paris fashion company founded by women belongs to Kai Yun group's rival and Swiss luxury group Richemont, investors and analysts have been wondering whether the latter will sell the brand because the brand belongs to "soft luxury", not in its core competitiveness, but also smaller than watches and jewellery series.

Although Richemont did not separately announce the sales results of Chlo and put it in the "other" category, including Chlo, Ala, a and Dunhill, the total sales volume was about 1 billion 800 million euros (about 2 billion US dollars), but analysts speculated that Chlo probably created 500 million euros (about US $559 million 800 thousand).

Advantage: Chlo? Is a globally recognized brand, whose brand gene focuses on femininity and creativity.

Although the brand has its own aesthetic style, it has no direct competitive relationship with Gucci and Saint Laurent.

More importantly, the brand's 1970s "petty bourgeois" sentiment can easily adapt to the current trend, and will not rely too much on the idea of a creative director.

(since Stella McCartney joined Chlo in the late 1990s, there have been a number of powerful female designers who have contributed to the creative inspiration behind the brand, including Phoebe Philo, Clare Waight Keller and now Natacha Ramsay-Levi).

The brand performs well in shoes and handbags. These two fields are driven by marginal effects, and will be introduced every season.

Disadvantages: Kai Yun group has several brands that are comparable to Chlo's. The brand still needs more investment to expand its scale.

From this point of view, Chlo's current master Richemont is different: the group has limited development in the fashion industry, and Chlo is the most successful "soft luxury" brand, so it is unlikely to sell it.

SALVATORE FERRAGAMO

For many years, Salvatore Ferragamo has always been regarded as "Sleeping Beauty". Although the brand gene is no problem, the whole brand is in trouble because of many high level changes and family ownership structure changes.

Its retail sales in China and the United States are quite large, but it has not been able to achieve breakthroughs and innovations in product and brand image for a long time.

Nowadays, Salvatore Ferragamo is gradually showing new vitality.

In February 2019, designer Paul Andrew was named the brand creative director.

According to analysts, the company's sales performance in the first quarter of 2019 will be improved with the new design launched by Andrew, including the best-selling "Studio" series handbags and the "Flower" series of high-heeled shoes.

The brand's sales in 2018 were 1 billion 400 million euros (US $1 billion 600 million).

Advantage: as a strong brand, Salvatore Ferragamo still has great room for development. If we can borrow the mode of Open Cloud group, let executives and designers freely distribute their work under a fixed framework, the brand will soon be able to rally.

The Ferragamo family managed the majority of the brand through a holding company, but the other members of the family seemed to advocate selling the brand as Wanda Ferragamo died in October 2018.

Disadvantages: however, an important family member dispelled the above conjecture.

"I love this company, it's not for sale," the chairman of the company, Ferruccio Ferragamo, said in an interview with Bloomberg in February.

"The brand is full of energy.

In the next few weeks and months, we will play this energy through multiple plans to bring good news to everyone.

The brand has long been popular in China, which means that we must adopt strategies beyond geographical expansion if we want to improve our performance.

BURBERRY

For a long time, the company has been the target of acquisition, and Tapestry, Inc., the parent company of Coach, has been considered a potential acquirer.

In 2000s, Christopher Bailey and Angela Ahrendts led the British brand to a major innovative pformation.

Now, CEO Marco Gobbetti and creative director Riccardo Tisci are leading Burberry in a new round of pformation.

Because the brand's status has been hovering under real luxury goods, they are trying to make their positioning clearer.

Burberry sales in fiscal year 2018 amounted to 2 billion 700 million pounds (US $3 billion 500 million), an increase of 2% over the same period last year, while sales in the first half of fiscal 2019 increased by 4%.

Advantage: Although the new creative director Tisci has not yet made Burberry reborn, but with the further development of the brand to the high-end market, consumer awareness of the brand has begun to change.

By September this year, more than half of the products on the market will come from Tisci.

At the same time, the brand is still using new marketing methods to brand, including limited edition sales and joint cooperation.

According to a Burberry report, in 2018, the brand had about 57 million consumers in social media.

Benefit from social marketing innovation, the brand is emerging from many competitors.

Secondly, the two person group formed by Gobbetti and Tisci is similar to the management mode of Kai Yun, which combines strong executives with the same excellent creative people to form long-term partnership.

Even though the brand is in a difficult fashion cycle, past traditions also help to maintain its basic reputation.

Disadvantages: Although Gobbetti has made some success in pushing Burberry towards high-end market, the brand still has a long way to go.

At present, the company is in the first stage of a two stage strategy: brand positioning in the first two years; and adjustment and distribution and investment experience in the second stage.

The brand has a large business in Asia, accounting for more than 40% of the total business, so there is less opportunity to continue to achieve rapid growth in Asia.

chopard

Swiss jewelry and watch brand Chopin (Chopard) is famous for its diamond watches, its brand history can be traced back to 1860.

The company's annual sales volume exceeds 900 million US dollars, which is an ideal acquisition target for the first class luxury goods group.

(the Scheufele family took the company in 1963, when the company employed only 5 employees).

Advantage: this brand that has lasted for a long time can help Kai Yun group strengthen its "hard luxury" strength.

Pinault said: "the jewelry market is very profitable."

Disadvantages: according to market sources, the family hardly ever thought of selling.

Calatrava Ref

The Swiss watch brand Patek Philippe (Patek Philippe) is not only an attractive luxury brand but also an evergreen watch brand in the eyes of watch collectors, whose annual sales exceed 1 billion euros (about 1 billion 100 million US dollars).

Advantage: Open Cloud group currently has two watch brands - Ulysse Nardin and Girard-Perregaux, which will further highlight the group's commitment to developing watch business if Patek Philippe is also under its revenue.

Watch business is the main source of cash revenue for Richemont.

Drawback: Although Patek Philippe's valuation has reached 7 billion to 9 billion euros (about 10 billion 100 million US dollars), the Stern family, which has run the company for four generations, said in 2019 that it would not sell the brand.

In addition, the future of the Swiss watch market is beginning to be questioned, and the whole market is in a state of stagnation.

Pinault said in February: "we are still observing."

At the same time, he also mentioned that the company has two watches brand Ulysse Nardin and Girard-Perregaux.