Kering in freefall in Paris; analysts are concerned about Gucci’s performance

(Il Sole 24 Ore Radicor) - Kering is in freefall on the Paris Stock Exchange following the publication of its third-quarter turnover, which proved disappointing. The Pinault family-owned group closed the July–September period with a turnover of €3,345 million, stable on a nominal basis and down 1 per cent on a like-for-like basis compared with the previous year. These figures were slightly above expectations, but concerns were raised by flagship brand Gucci, which reported revenue of 1,291 million euros, down 4 per cent on a nominal basis and 6 per cent on a like-for-like basis. In company-owned stores, the decline was 9 per cent.

The reassurances offered by Armelle Poulou, Kering’s chief financial officer, were of little help; during a conference call, she highlighted that the group is focusing on the relaunch of the brand and is beginning to see some positive effects, such as a higher average receipt value and a more promising conversion rate of in-store visits into purchases. She also explained that the group is seeking to review its product range and win back Chinese customers through tailored campaigns aimed at local consumers (sales in the APAC region were down 14 per cent). However, Gucci’s 6 per cent fall in sales was worse than the consensus forecast and overshadowed the strong performance of other brands and the positive trend in the jewellery sector, where sales jumped by 18 per cent (on a like-for-like basis), well above the consensus forecast of around +14.5 per cent.

“It is worth noting that, for Gucci, the decline is even more pronounced in company-managed stores – standing at -9 per cent, around 3 percentage points worse than the company’s consensus forecast – a figure partially offset by a 45 per cent increase in the wholesale channel. It remains to be seen whether this is a sign of increasing commercial pressure on this channel, which would be a negative sign”, pointed out Bernstein, which confirmed its ‘Market-Perform’ recommendation on Kering but cut the target price to 210 euros from the previous 270 euros. “Management attributed part of the recent slowdown to the timing of new product launches; according to senior management, a more packed schedule of new launches should boost growth in the fourth quarter of 2026’, commented Luca Solca, the Bernstein analyst, adding: ‘However, such a marked reliance on new product launches to drive footfall and sales suggests a lack of underlying appeal for Gucci’s core products. In our view, this is symptomatic of a brand vision that still appears somewhat undefined to consumers.’ Jefferies has also cut its forecasts and consequently reduced its target price for Kering from 220 euros to 200 euros, pointing the finger largely at Gucci’s disappointing performance.