(AOF) – Kering (-12.90% to 370.80 euros) is bottom of the CAC 40 after its warning on Tuesday evening. The luxury group warned that its consolidated turnover would drop by around 10% on a comparable basis in the first quarter of 2024 compared to last year. In its wake, other luxury stocks in Paris are falling: LVMH (-2.85%), Hermès (-1.02%), L’Oréal (-0.87%). “This performance mainly reflects a more marked decline in Gucci, particularly in Asia-Pacific,” explains Kering to explain the decline in its sales over this period.
Thus, Gucci’s turnover as of March 31 should be down almost 20% on a comparable basis. When presenting its 2023 annual results last February, Kering had already been penalized by a drop in sales of its Gucci brand. Representing half of the company’s turnover, they stood at 9.9 billion euros, a decline of 2% on a comparable basis. Gucci also represents more than two-thirds of the group’s current operating profit.
In addition, for this first quarter of 2024, Kering announces that “the combined effect on published revenue of the positive contribution linked to the consolidation of Creed and the negative impact of exchange rates is estimated to be around from -1% to -2%.
Despite this warning, Kering announces that “the first products from the Ancora collection have started to be available in certain Gucci stores since mid-February and mainly in the ready-to-wear category. The new collection, the deployment of which should gradually be accelerate over the coming months, is very well received.
Analysts lower their price target on Kering
In reaction to this other information, JP Morgan explains that “the transition will take time and that the lack of dynamism of the old collections will continue to weigh on the overall growth of sales and profits, more than the optimists affirm”.
Furthermore, the American bank remains Neutral on Kering shares by lowering its price target for December 2025: from 425 to 400 euros. It explains having reduced its forecasts by an additional 7% for 2024 and by 5%-6% for the following years. It expects Gucci’s EBIT margin to be down 620 basis points year-on-year in the first half and down 320 basis points to 29.8% for the year.
For its part, Kepler Cheuvreux remains Hold on Kering having reduced its price target from 460 to 420 euros. “Given Kering’s high fixed cost base (75% of opex), the impact on margin will be considerable. We are reducing our adjusted earnings per share estimates by 12%, 9% and 8% respectively for 2024, 2025 and 2026″, underlines the broker.
Also reacting to this warning, in its note published yesterday, UBS (remains Buy with an unchanged price target of 480 euros on Kering) predicted that the luxury sector could be down today due to concerns about a slowdown in China in particular, after last year’s strong performance. Kepler Cheuvreux specifies, however, that this warning is partly specific to Kering.
Kering will reveal its revenue for the first quarter of 2024 on April 23 after market close.
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