Kering

Note: This is a daily stock update and the information stands true as of 01/10/24, 09:00 CET.

Company Update:
Following a company contact, we’ve cut our estimates, lowered our target price and cut our opinion to Reduce vs. Buy previously.
It seems that the consumer environment worsened further during the summer.
Despite the stimulus plan in China, we believe the impact on luxury consumption by Chinese consumers over the short-term future will be limited. In Japan, the normalization of the Yen will have an impact on tourism which was a key component of the strong performance of the country and in Western markets a softer macroeconomic environment and an exhausting high-pricing environment have weakened local consumer demand, alongside the slowdown in tourist spending, as reflected in Global Blue's Tax-Free Spend data.

Expert Opinion:
The recent massive surge in the sector on the back of the Chinese announcements was surprising to me. I still believe the consumer is under pressure in many geographies and growth expectations for the sector are somewhat excessive. On top of these macroeconomic issues, Kering is facing idiosyncratic issues, notably for its Gucci brand. On the back of our numbers, Gucci still trades on a PE 24 and 25 of 18x and of 17.1x for 2026. Yes stock is down 55% from its April 23 highs but is only back to its 2017 levels and one can argue that the sharp rise during the Covid period was the anomaly.  
The X read is obviously negative for the whole sector. Very high-end brands like Hermès and Ferrari are probably slightly more protected from a more sluggish consumer environment.

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