Key Morningstar Metrics for Kering
- : EUR 360Fair Value Estimate
- : ★★★★Morningstar Rating
- : NarrowMorningstar Economic Moat Rating
- : MediumMorningstar Uncertainty Rating
Kering KER revenue was flat on comparable basis in the first quarter. Jewelry and eyewear performed strongly, and Saint Laurent, Bottega Veneta, Balenciaga, and Brioni recorded growth. Gucci sales declined by 8% (negative 10% in prior quarter), improvement driven by better sales in North America.
Why it matters: Improvement in brand appeal and recovery in sales for Gucci are key to our thesis on Kering, given its contribution to sales and profits. Although we see sequential improvement, it is too early to say if Gucci’s appeal is turning the corner. More details on Gucci’s roadmap for recovery are expected to be announced during the group’s capital markets day on April 16.
- Sales in Americas drove sequential improvement both for the group and for the Gucci brand, which were up 9% and 8%, respectively, (2% and 0% in prior quarter). Earlier-reported Brunello Cucinelli also saw improvement in this market, while for LVMH it was less pronounced. We see potential for North American sales to rebound for Kering and the luxury sector, given an easier comparison base in this market (after three weak years) and strong asset markets.
- Gucci didn’t yet see improvement with the Chinese consumers; European and other Asian buying trends were sequentially better.
- Sales in the Middle East were down 11%. The region contributes 5% to retail revenue.
The bottom line: We are maintaining our fair value estimate for narrow-moat Kering, although we expect to reduce our forecasts for revenue recovery in 2026 given the softer start to the year. We still believe it is likelier than not that the Gucci brand returns to growth and industry outperformance given its strong brand recognition, very significant marketing resources, control over distribution (greater than 90%), and access to top managerial and creative talent. Shares remain attractive.
