Kering

Company Update:
All divisions reported better-than-expected operating margins. Cost discipline, inventory reduction and ongoing retail optimization continued to enhance operating efficiency, while net debt fell by €4.7bn to €3.3bn, supported by the disposal of Kering Beauté and recent real estate transactions.  Gucci delivered its strongest sequential improvement in several quarters, with accelerating retail trends, a 1ppt improvement in operating margin and early signs that the turnaround strategy is gaining traction, despite continued weakness in China.

Management confirmed that, despite stronger margin generation in H1, H2 margins are still expected to exceed H1. The group also reiterated its FY26 targets, including a €1.0bn inventory reduction within Fashion & Leather Goods and a net reduction of 100 stores, following 84 closures completed in H1.

The strengthened balance sheet, improved cost efficiency, and traction at Gucci reinforce our conviction that Kering is moving in the right direction, although the recovery is expected to remain gradual.

Expert Opinion:
This is indeed encouraging, and Luca De Meo's magic may work. The turnaround of Gucci is the key component of the Kering's equity story: ADRs in NY were up 15% last night.  Yet, we find the valuation still expensive despite the recent correction (PE26 of 38.4x and PE27 of 29.6x). We wouldn't chase the stock this morning, especially if Kering opens up more than 10%, following the ADR.  


For daily updates, subscribe to our newsletter and for detailed information, reach out to us at sales@alphavalue.eu