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Kering: Gucci disappoints, the share price drops

 

 

 

 

 

 

 

 

 

 

 

 

 

Kering: Gucci disappoints, the share price drops

At the bottom of the CAC40, Kering fell by 2.7% to 558.6 euros at the beginning of the session this Friday, despite the fact that the luxury group has nevertheless unveiled a clear improvement in its activity in the third quarter.

 

Total revenues came to E3.72 billion over the period, down 4.3% as reported and 1.2% on a comparable basis, marking a significant rebound compared with a decline of -43.5% as reported and -43.7% on a comparable basis in the second quarter.

 

Kering was able to take advantage of very strong growth in certain geographic regions, notably North America (+44.1%), supported by a rebound in local demand, and Asia-Pacific (+18.5%), driven by excellent momentum in mainland China. Performance in Western Europe (-41%) and Japan (-22.8%) continued to be strongly impacted by the interruption in tourist flows.

 

However, investors seem to be mainly focused on the ‘poor’ performance of Gucci, the main contributor to the Group’s earnings, whose sales declined by 8.9% like-for-like, while all the other brands grew, including Bottega Veneta, which recorded growth of 20.7% and Yves Saint Laurent, which returned to growth (+3.9%). According to management, Gucci is suffering more because of its greater exposure to tourist flows.

 

Faced with conditions that remain uncertain, and despite limited visibility, we are well prepared and confident in our ability to achieve good performance over the long term,” said the group’s CEO, François-Henri Pinault.

 

Kering sales were “slightly” above consensus expectations, with the Bottega Veneta brand being “the star” of the quarter, according to Bernstein (‘market performance’). The performance of the Saint Laurent brand was “solidly positive” while Gucci appears to be lagging behind the other brands. For the broker, the key question for Kering is how quickly and efficiently Gucci will be able to renew itself.

 

For Jefferies (‘keep’), Kering beat the consensus at all levels “except where it mattered“. Gucci is the short-term problem. Momentum is moving in the right direction at the end of the year, but investors now expect much better trends in the fourth quarter.

 

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Crisis or no crisis, we at Invest Securities continue to believe that Kering has the brand portfolio and the ad-hoc strategy (omnicanality and consumer/brand interactions) to deliver superior growth potential in the end. The broker is thus ‘buying’ on value and is raising its target from 525 to 630 euros.

 

 

 

Lire aussi > HERMÈS REPORTS A SHARP REBOUND IN BUSINESS IN Q3

 

Fearured photo : © Louis Vuitton

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