Kering has been the sick man among major luxury conglomerates for a number of years. There are many ways to measure its relative underperformance. Looking at its share price, it has fallen almost 40 percent since the start of the pandemic. This compares catastrophically poorly with LVMH and Richemont, whose shares have risen 80 and 90 percent, respectively. Looking at just 2024, Kering’s share price is down around 1 percent while the FSW All Luxury Index is up over 8 percent.
In terms of vision and stability, Kering has really struggled in the past few years. The departure of Marco Bizzarri as Gucci CEO in July of last year was a shock. Gucci contributes over 60 percent of the Kering’s operating income and his departure contributed to a sense of directional uncertainty that began with Alessandro Michele’s departure in November 2022.
Things have not been a total disaster as the luxury group is still very profitable (posting net income of €1.79 billion in the first half of last year) but the trend has been in the shape of nosedive (that €1.79 billion was down 10 percent on the prior year) and it has performed exceptionally poorly when compared with its peers.
So what should we expect when Kering releases its full year 2023 returns on February 8? The market expects another poor installment with the average EBITA (earnings before interest, taxes, and amortization) forecast at €6.7 billion, down over 9 percent from 2022. Since FSW is more interested in looking at long-term trends, let’s assess the historical rolling EBITA estimate and stock price for the next 12 months (NTM) below. This gives a picture of the continuation of a down trending earnings estimate (blue line) and is reflected in a free falling stock price (black line).
Yet could this be a storm before the calm? The market does expect positive earnings growth next year (3.2 percent) and very strong growth in 2025 (~ 10 percent). Presumably this optimism originates from the view that the management transitions at Kering slow down and the new strategic directions yield returns amid a hopefully improving macroeconomic backdrop. We remain fairly optimistic about Kering long-term given its commitment to strong brand storytelling across a range of innovative platforms.
You can keep track of Kering’s financial releases on their investors’ page: https://lnkd.in/gN8hVY9r