Most people probably don’t see the role of finance chief as inherently glamorous. But they might make an exception in the case of Jean-Marc Duplaix, CFO of $12.6 billion luxury and sports/lifestyle group Kering, which owns Gucci, Saint Laurent, Alexander McQueen, Volcom and PUMA, among other brands. Duplaix, the former CFO of French media behemoth M6 Group and former board member of the FC Girondins de Bordeaux football club, spends most of the year at company headquarters in Paris. But he also travels regularly to cities like London, Milan, New York and Hong Kong to meet with the heads of each brand and visit company stores.
Duplaix has his hands full. Since the mid-2000s, Kering (formerly known as PPR) has deployed an aggressive M&A style to transform itself from a European-based retail group to an international luxury goods and sports/lifestyle company. The group has acquired several new brands over the last year, including a Chinese company and an Italian fine-jewelry line. But Duplaix, who joined the company as its finance chief in 2012, says Kering also has its eye set on organic growth in both emerging and mature markets.
Kering’s sales are growing. Revenue jumped 3.1 percent (on a comparable basis) in the first quarter of 2013, driven by increased luxury-brand sales. But the company also faces challenges in its sports and lifestyle division; revenue in that corner dropped 2.5 percent in the first quarter. Indeed, in April, Kering hired a new CEO to help bolster PUMA, one of its most well-known sports brands, which recorded a 2 percent drop in sales in the first quarter. As CFO, Duplaix spends much of his time trying to keep things running smoothly at each of the company’s 19 brands.
CFO sat down with Duplaix to talk about how he helps guide Kering’s M&A decisions and how he is helping to lead the the group’s transformation.
What’s an average day like for you?
When I’m at our headquarters in Paris, I try to spend 12 hours a day at the office. We have all these projects to manage, and I have several meetings in a day on topics like information-system projects and real estate issues — for example, opening of new stores. We have discussions around profitability expected from the stores. I also need two or three hours to be quiet and to think about long-term issues. The rest of the time I have meetings with team, advisers and management.
And sometimes I’m traveling. We have many meetings with our brands, and we try to go to them — so that might mean London for Stella McCartney and Alexander McQueen or Germany for PUMA. We’ll have a full day dedicated to meeting with the CEO and CFO [of each portfolio company] and visiting the stores.
What percentage of your time do you spend on strategy?
It’s difficult to assess, but I would say that I think that about 15 or 20 percent of my time is dedicated to strategy. I have tried to set aside time to think just about strategy and actions to implement it. I’ll hold meetings to discuss things like, for example, how many stores should we have in Shanghai for a certain brand, considering the economics, dynamics and demographics of that city.
When it comes to strategy, action is important. When you think about a declining market, once you have the figure, you have to say, “okay this market is difficult, what is the next step”? It may be more advertising or having more product demonstrations. It’s part of my role to support or to challenge such decisions. After that, there will be a derivation of this strategic thinking in the financials and the budget. But it’s also really important to first to think about strategy without being polluted by figures.
What are the biggest challenges that you face as a company?
Because of the way the group is now structured, we have three main challenges. First, a few years ago, when Kering was named PPR, it was still predominantly a retail group in Europe and mainly in France. So one of our challenges was to transform the group by being more integrated with all of our corporate headquarters outside Europe and with all our shared services, some of which we had to create from scratch. In Shanghai, we had no shared services. So I had to have someone searching for a location and for offices.
The second challenge is how to manage the different stages of development and maturity of our brands. We cannot compare Gucci, with 3.6 billion euros in revenue, with Stella McCartney, which is a fast-growing company, but far smaller. You do not have the same challenges. You do not have the same issues around return on capital, capital allocation and capital expenditures. As a CFO, because I think globally, I need to be very careful about this.
Third, the transformation of our sports and lifestyle division. We have a very strong brand with PUMA, but we are facing some challenges in terms of profitability and product positioning of the brand, which could be improved.
Can you tell me a little bit about the challenges that PUMA is facing?
In the 1990s, there was an amazing turnaround of PUMA, which grew very rapidly. But they did not have a strong enough framework. They had too many SKUs [stock-keeping units] and too much autonomy in each region. So we are trying to rebuild PUMA as a more consistent, organized group. It’s also about the product position and innovation. I think that PUMA was quite strong in the lifestyle segment, but the DNA of the brand and the legitimacy of the brand is in sports and performance. And we need to regain desirability in that field, to have more innovative products and also more efficient marketing.
What lessons have you learned about M&A?
I think M&A for the sake of M&A is quite dangerous. Sometimes it’s a tool to serve the ego of the managers. They are so proud to expand the group, but I think that can sometimes be the worst thing you can do. The role of the CFO is to remain objective and give a fair view of whether or not the target is relevant to the company. Synergy is not only a principle or an idea; it’s a reality. If you just want to serve analysts and the financial community, that’s a mistake. You must fairly, honestly try to assess if you have synergies and if you can bring something to the target.
What challenges come from having a portfolio of so many high-profile companies?
People know the products. When you meet someone in the financial community, or among your suppliers or advisers, they always comment about them. So I need to know the products too. For example, one of the most important products for Stella McCartney is the “Falabella” bag. Imagine, I’m the CFO, and someone talks about the Falabella bag and and I don’t know the product. That would be very bad. So it’s really important to be very aware of the new collections. That’s why each time I’m abroad I spend time in the stores and meet the salespeople, because I need to understand.
Where are you looking to grow going forward?
I think it’s more about geographics. We have 40 percent of our business in emerging markets and 60 percent in more mature countries. There’s huge growth potential in China because there’s an emerging upper middle class there. Of course there will be a pickup in South America, the Philippines and India. But there are still opportunities for luxury in the mature market. This year we’ll open more stores in mature countries than in emerging market countries.
For sports and lifestyle, when you are focusing on very popular sports like soccer, especially in Europe or South America, you also have great opportunities. This year we are the sponsor of one of the first German soccer clubs. PUMA was very smart to sponsor cricket clubs in India, and that’s why we have a strong position in India.
Really, our key concern is first on organic growth. We try to identify any opportunities to open new stores and develop new distribution channels, like online sales, which are 8 percent of our business in the United States, but only 3 percent in China. So we can improve and we have all these different means to foster organic growth in different markets. For example,Volcom had no footwear lines and thanks to the collaboration and support of PUMA, they developed a line of shoes very rapidly that launched in September. It’s a very exciting experience, joining this group at this moment of huge transformation.