Puig score 5% increase in 2018 net profit, even as revenues edge lower

By

Godfrey Deeny

Published
May 9, 2019

Puig, the Spanish fragrance and fashion group, scored a 5% increase in net profit before taxes in 2018, even while its total revenues edged down two million euros; as the group predicted its two largest brands – Paco Rabanne and Carolina Herrera – would break one billion euros each in annual sales.

  
“The company’s goal going forward is to generate revenues of 3 billion euros by 2025,” said Puig in a release.
 
The Barcelona-based group announced Thursday that pre-tax profit grew 5% to 326 million euros, a record figure for the company. This represented a solid 17% of the company’s annual 2018 turnover of 1.933 billion euros. The group stressed in a press release that this represented a 5% rise in turnover on a like-for-like, constant exchange rate basis. However, sales did fall marginally in financial terms.

Founded in 1914, Puig is owned by a large group of family members since three generations, and controls five well-respected fashion houses: Carolina Herrera, Nina Ricci, Paco Rabanne, Jean Paul Gaultier and Dries Van Noten, which the Spanish company acquired last year.  Its two key decision makers – Chairman and CEO Marc Puig Guasch and Vice Chairman Manuel Puig Rocha – are both grandsons of founder Antoni Puig i Castello.
 
“Puig is strengthening its model of owned brands and its position in the fashion world with the acquisition of Dries Van Noten,” the group underlined in the release. However, Puig’s financial release did not reveal how much it paid for its majority stake in Antwerp, Belgium-based Van Noten, which it acquired last June.  The plan is to extend Van Noten “to the fragrance category with very selective distribution, as we do with fashion.”
 
The group plans to place more emphasis on brands it directly controls, rather than licenses. Puig controls the perfume licenses to both Comme des Garçons and Prada. However, the decision of Valentino to terminate its fragrance with Puig clearly underlined to the group the long-term fragility of relying on luxury brands that it does not control.
 
“This made us shift our strategy, giving more support to our owned brands, with which we will be much more ambitious. We want to make Paco Rabanne and Carolina Herrera into brands generating revenues of over €1 billion, by reassigning resources previously dedicated to supporting licensed brands,” Puig cautioned in the release.
 
At Paco Rabanne, artistic director Julien Dossena has garnered very favorable reviews, while the brand is ranked fourth globally in fragrances, Puig noted. Adding that both Herrera – where the group installed talent young American designer Wes Gordon as its new creative director, as founder Carolina Herrera became the brand’s global ambassador - and Rabanne, will “enter new categories in the near future,” without revealing more.
 
Gaultier’s fragrances achieved “a historic sales record in its third year after joining” Puig. However, Puig picked an odd choice of words to describe the debut of Nina Ricci’s new creative directors, Rushemy Botter and Lisi Herrebrugh, this spring, saying the show “made a surprisingly positive impact.”

In a busy year, Puig also inked a deal to develop the famed shoemaker Christian Louboutin’s beauty business. “This strategic alliance affords entry into the color cosmetics category and offers a source of learning for knowledge transfer to the owned brands,” said Puig.
 
Besides these noted designer labels, Puig also controls the scents businesses of Penhaligon’s, Artisan Parfumeur, Shakira, Benetton and Antonio Banderas.  
 

 Finally, Puig has been busy brand shopping in 2018. It acquired a minority stake in Colombia’s Loto del Sur, and in Kama Ayurveda, the Indian beauty and care brand – with options to increase both the majority stakes.