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Jun 22, 2015
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Alexander McQueen to double in size under Kering

By
Reuters
Published
Jun 22, 2015

Alexander McQueen, one of Kering "small" clothing brands, expects to double its sales within three to four years and boost its profitability thanks to the expansion of its store network and to a stronger focus on leather goods.

Alexander McQueen SS16 London Collections: Men - ©Ben Stansall, AFP


Known for its stunning dresses made with the finest materials, closer to haute couture than ready-to-wear, the label currently posts a revenue of approximately 250 million euros and expects to increase that to 500 million by 2017 or 2018, according to the forecasts given to financial analysts by its CEO Jonathan Akeroyd.

In terms of sales, the brand comes in second after Balenciaga in the cluster of Kering’s small brands, which also owns Gucci and Bottega Veneta.
However, it remains far behind Saint Laurent, the sales of which crossed the 700 million euro barrier after having shown, by far, the group’s best organic growth (+27%) in 2014.

Alexander McQueen’s operational margin, which varies between 10% and 12%, according to estimates, should reach 15% in the next three or four years thanks to greater control of its distribution, a better sales rate per square metre and a strict control of costs in its store network.

Despite a difficult economic environment for the luxury industry, due to a decrease in the Chinese market and the massive drop of tourists travelling to Hong Kong and Macao, Alexander McQueen thinks it can double the number of its fully-owned stores (to 90, as compared to its current 45) with openings planned in Europe, Asia, the United States and Japan.

Thanks to this expansion, the label will increase the portion of its sales generated in its fully-owned stores from 36% to 54%, the rest coming from third-party distributors (department stores, mult-brand stores, etc.).

It also expects to boost its profitability by increasing the share of its leather goods in its revenue, which could account for more than 30% of its sales within three or four years, compared to 20% in 2014.

It is also counting on its quickly growing « accessible » luxury segment with its second line "McQ", which is sold at half the price and which accounts for approximately 20% of its sales.

"For Kering this will be another example of the successful development of a brand, after Bottega Veneta, Saint Laurent and Balenciaga", said Mélanie Flouquet, an analyst at JP Morgan, for whom the growth plan seems a bit classic nevertheless for a brand that is so unconventional.

For the Kering group though, this plan only represents a growth potential of 2% for sales and 3% for the operational income, according to analysts at Barclays.

(Pascale Denis, revised by Jean-Michel Bélot)

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