Kering Shares will pop 6% on the fourth quarter beat, following sales at Gucci Brand Lag

Stocks Kering The French luxury company jumped out on Tuesday after reporting a better-than-expected fourth-quarter sales amid lagging demand for major Gucci labels.

High-end fashion groups, which also include brands such as Bottega Veneta, Balenciaga and Alexander McQueen, have earned 43.9 billion euros (4.5 billion euros) in the fourth quarter, slightly ahead of the forecast of 4.29 billion euros by LSEG analysts ($20 million) fell 12%. .

Sales at Gucci, which accounts for almost half of the group’s total revenue, plummeted 24% to 19.2 billion euros in three months, extending the loss of the group’s former beloved luxury label on an equal basis. did.

Kering’s shares rose 5.5% in opening trade on Tuesday.

Full-year sales also soaked between 12% and 171.9 billion euros, against the expected 170.9 billion euros.

Operating profit for the year was 2.55 billion euros in line with the group’s revised forecast as of October, but nearly half of the 4.755 billion result achieved in the previous year .

“In a difficult year, we have moved explicitly to accelerate the transformation of several homes and strengthen the health and desirability of our brand over the long term,” said François Henry Pineau, Chairman and CEO. said in a statement.

“Our efforts must remain sustained and we are confident that we have pushed kelling to a point of stabilization.

The French fashion house pointed to slight improvements in Asia-Pacific and North American sales of Gucci, Yves Saint Laurent and Bottega Veneta brands, but did not provide details on any particular market.

Kering is the latest European luxury group reporting revenue over the last few weeks as investors look for signs of a rebound in the sector, especially the recession in the major Chinese market. is.

Last month, investors were overwhelmed by the year-round results that were slightly better than expected from the luxury teacher LVMH. The market had trusted in a sector-wide transformation after the emergence of a star from Cartier’s owner Richmont, but LVMH’s fashion and leather products, wine and spirit segments bring further diversity to the sector. I was pointing.

Kering, particularly exposed to Chinese consumers, is fighting a particularly sharp recession as its star label Gucci has dropped out of the trend.

On Thursday, the fashion group announced the departure of Gucci’s design chief Sabato de Sarno, in its first major change since Gucci CEO Stefano Cantino joined in to revive the brand. The minimalist designer, Derno was there within two years after the biggest designs replaced Alessandro Michele, who had defined the brand for the past few years.

The De Sarno alternative will be announced “soon,” the company said in a statement.

Simone Ragazzi, senior equity analyst at Algebra Investments, said on Monday that Kering hopes to signal brand reset with the appointment of a new design, but investors remained with legacy issues. He added that he is likely to be cautious because he is there.

“This is a hope the market has been betting for quite some time. It’s always a bit of a question mark,” he told CNBC about the video call.

“The brand has become accustomed to the ups and downs of the past as it is one of the most fashion-driven luxury groups of all time,” he continued. “The hope is that new designers can re-engrave the brand.”

Kering’s shares are currently down 2.5% this year, with more than half of the stocks increasing since 2023.

Luca Solca, a senior analyst in Bernstein’s global luxury goods, noted a positive development in operating profit across virtually all brands in 2024, but the company still remains to return to its previous highs. He pointed out that he was climbing a steep hill.

“The absolute decline compared to 2023 is impressive. For Kering, this was “Anu Holibilis.” This is reflected in the stock price a lot. We hope that the market will focus on Gucci’s new creative responsibility,” he said.