Kering share price down, benefits from strong demand for Saint Laurent, Bottega Veneta brands

Kering SA reported annual results in line with expectations as robust performance from the groups smaller luxury brands made up for lower demand of its core product line ups.

Net income increased substantially from €49.6 million in 2013 to €528.9 million in the past year, despite poor financial performance of its two main brands, Puma and Gucci.

The French company reported a revenue of €10.04 billion in 2014, up 4.5% compared to the prior period.

The struggling Gucci brand saw it sales decrease for two consecutive years as its designs covered in logos have fallen out of favor. The brand has been trying to breathe life into its product line up but without much success as the prolonged economic weakness in Europe has dulled demand for high-priced merchandise.

Kering has undertaken some management changes in its efforts to revive the brand. Marco Bizzarri, former Chief Executive of Kerings Bottega Veneta brand, was appointed CEO of Gucci and Alessandro Michele, who joined the brand in 2002, took the position of creative director.

Additionally, Kering said that reviving sales, which fell 1.1% in the past year, of the Italian brand would be key target for the company in the year ahead. Gucci stated a revenue of €3.49 billion, representing the companys biggest source of sales.

Puma, which the Kering acquired in 2007 by purchasing 86% of its shares, is also going through restructuring changes as it strives to spur demand for its sport goods.

Although the brand reported a 3.4% increase in revenue to €3 billion, operating income decreased significantly and financial figures missed overall expectations.

Puma appointed pop star Rihanna as creative director in charge of the company’s female collections, replaced Nike as an outfit provider for the English top soccer team Arsenal and launched a new marketing campaign dubbed “Forever Faster”.

For 2015 the brand projected revenue, excluding the impact of currency shifts, to climb by medium single-digit.

The disappointing performance was offset by strong results from Kerings Bottega Veneta and Yves Saint Laurent brands.

The brand best known for its leather products reported a 12.6% increase in revenue to €1.13 billion, while Saint Laurent gained 27.2% to €707 million in 2014.

“I am confident in the groups ability to achieve sustainable profitable growth while focusing in the shorter term on our brands’ cash flow generation,” said Chief Executive François-Henri Pinault.

Kering fell 0.96% on Monday and closed at €181.15 in Paris. On Tuesday the stock dropped 3.48% to €174.85 at 10:28 GMT, marking a one-year increase of 13.69%. The company is valued at €23.09 billion.

According to the Financial Times, the 26 analysts offering 12-month price targets for Kering have a median target of €173.00, with a high estimate of €225.00 and a low estimate of €145.00. The median estimate represents a 4.50% decrease from the last closing price.