Kering: Lowering Our Fair Value Estimate to EUR 380 On More Prolonged Gucci Recovery; Shares Cheap

We are lowering our fair value estimate for narrow-moat Kering to EUR 380 from EUR 445 to reflect our assumptions for a slower return to growth for its main brand Gucci. We now expect 2025 to be another depressed year for the brand with a 15% decline in revenue. We expect low-single-digit revenue growth in 2026 and a double-digit rebound thereafter. The basis for our tempered expectations is first, the appointment of Demna as creative director of Gucci. It typically takes five to six quarters after appointments to see if a new creative director's collections are well accepted by consumers, so the results of this appointment will unlikely be seen before 2026. Second, we believe it is reasonable to expect that 2025 will be another difficult year for luxury given geopolitical instability and market turmoil. Brands with weaker momentum tend to underperform in downturns and most brands in Kering's portfolio have higher exposure to aspirational consumers, who are hit harder by the economic conditions, compared with competitors like Hermès.