Company Reports

Kering delivered a sequential improvement in revenue trends in the second quarter, with Gucci's comparable revenue decline narrowing to 2% (negative 8% in the first quarter) and half-year margin improving by 40 basis points. Markets reacted positively, sending shares up 10%

Kering’s portfolio of luxury brands provides the company with a narrow economic moat and a good platform for future growth. The flagship Gucci brand accounts for over 40% of revenue and over 60% of the company's earnings, but brands like Saint Laurent, Bottega Veneta, and Balenciaga are also set to support growth in the future.

Kering’s portfolio of luxury brands provides the company with a narrow economic moat and a good platform for future growth. The flagship Gucci brand accounts for over 40% of revenue and over 60% of the company's earnings, but brands like Saint Laurent, Bottega Veneta, and Balenciaga are also set to support growth in the future.

We attended Kering's capital markets day in Florence, where the management presented its midterm plan for the group's revival. Goals included more than doubling operating margin from 2025 levels (11% versus high 20s historically) and improving return on capital employed to above 20%.

Kering’s portfolio of luxury brands provides the company with a narrow economic moat and a good platform for future growth. The flagship Gucci brand accounts for over 40% of revenue and over 60% of the company's earnings, but brands like Saint Laurent, Bottega Veneta, and Balenciaga are also set to support growth in the future.

Kering revenue was flat on comparable basis in the first quarter. Jewelry and eyewear performed strongly, and Saint Laurent, Bottega Veneta, Balenciaga, and Brioni recorded growth. Gucci sales declined by 8% (negative 10% in prior quarter), improvement driven by better sales in North America.

Luxury sector shares were down by 1%-7% on March 2 following the US and Israeli attacks on Iran and Iran's retaliatory attacks on Israel and US bases across the Middle East (United Arab Emirates, Saudi Arabia, Qatar, Kuwait, and Bahrain).

Kering reported continued sequential improvement in sales trends in the fourth quarter, as comparable store sales were down 3% (negative 5% in the third quarter), and Gucci was the only brand with declining sales. Operating profit was down 33% because of operating deleverage.

Kering Group’s portfolio of luxury brands provides it with a narrow moat and a good platform for future growth. The flagship Gucci brand accounts for over 40% of revenue and over 60% of the company's earnings, but brands like Saint Laurent, Bottega Veneta, and Balenciaga are also set to support growth in future.

Kering's sales improved substantially in the third quarter, declining only 5% on a comparable basis (compared with 15% in the previous quarter). The decline was less than was expected by the market, resulting in the shares rising around 10% at market open on Oct. 23.

Kering said it will sell the House of Creed high-end fragrance firm (acquired in 2023 for EUR 3.5 billion) for EUR 4 billion to L'Oréal, and sign 50-year licenses for Gucci (after the Coty license expires), Balenciaga, and Bottega Veneta (L'Oréal already has a beauty license for Yves Saint Laurent).

After market rumors earlier this week, Kering officially announced the appointment of Francesca Bellettini, former CEO of Saint Laurent (2013-23) and most recently the group's CEO in charge of brand development, as CEO of Gucci. The deputy CEO role will be discontinued.

Kering reported another quarter of declining sales, with a sequential decline in the second quarter. The group is now looking ahead to a potential turning point with the debut of a new Gucci collection by Artistic Director Demna and the arrival of incoming CEO Luca de Meo in September.

Kering's shares rallied almost 10% after media reports suggested that the departing CEO of Renault, Luca De Meo, will join the group as CEO to replace Francois-Henri Pinault.

We are reducing our fair value estimate for narrow-moat Kering to EUR 360 from EUR 380 as the company reported continuing weak revenue trends in the first quarter.

Kering Group’s portfolio of luxury brands provides it with a narrow moat and a good platform for future growth. The flagship Gucci brand accounts for over 40% of revenue and over 60% of the company's earnings, but brands like Saint Laurent, Bottega Veneta, and Balenciaga are also set to support growth in future.

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.

Kering Group’s portfolio of luxury brands provides it with a narrow moat and a good platform for future growth. The flagship Gucci brand accounts for over 40% of revenue and over 60% of the company's earnings, but brands like Saint Laurent, Bottega Veneta, and Balenciaga are also set to support growth in future.

We are maintaining our fair value estimates for stocks in our luxury coverage following the announcement of reciprocal tariffs by US President Donald Trump. Tariffs of 20% on the European Union, 10% on the UK, and 31% on imports from Switzerland are having the most impact on our coverage (as well as 36% tariffs on Thailand for Pandora, where most of its manufacturing takes place). Americans account for around 30% of global luxury consumption and sales exposures in the Americas for companies under our coverage range from the midteens to high 30s. Moncler, Prada, and Swatch are least exposed; EssilorLuxottica, Brunello Cucinelli, and Pandora are most exposed.

We are maintaining our fair value estimate for Kering following the announcement of Balenciaga’s Demna being appointed as Gucci’s artistic director.