On Thursday, Deutsche Bank’s analyst Matt Garland revised the price target for Kering (EPA:PRTP) SA (KER:FP) (OTC:PPRUY), the parent company of luxury brands such as Gucci and Yves Saint Laurent, to €177.00, down from the previous target of €205.00. Despite the adjustment, the firm maintained a Hold rating on the stock.
Garland provided insights into Kering’s first-quarter revenue performance, which showed a 14% decline at constant exchange rates, falling short of the consensus estimate. The reported revenue amounted to €3,883 million, which was 3% below the anticipated €4,003 million. Gucci, one of Kering’s flagship brands, experienced a 25% drop in sales growth at constant exchange rates, slightly underperforming against both the consensus and Deutsche Bank’s expectations.
Yves Saint Laurent (YSL) saw a 9% decrease in sales at constant exchange rates, which was slightly better than the consensus prediction of a 10% decline. Bottega Veneta, another brand under Kering’s umbrella, reported a 4% increase in sales, although this was below the 6% growth anticipated by consensus. The Other Houses division, which includes various smaller brands, saw an 11% decline, more than the 7% predicted by consensus.
Sales of Kering Eyewear and Beauty products reached €558 million, falling short of the €571 million consensus estimate. Geographically, sales decreased by 13% in the Americas and Europe, by 11% in Japan, and significantly by 25% in Asia.
The analyst noted that the luxury sector had set modest expectations ahead of Kering’s earnings report, influenced by mixed results from competitors like LVMH, which saw a 5% fall in Fashion & Leather goods, and Hermes, which had a slower than expected 7% growth at constant exchange rates. Garland emphasized the uncertainty surrounding Kering’s investment case, particularly due to the recent change in creative direction at Gucci, leading to a cautious ’wait and see’ approach. He also pointed out that the sequential slowdown in all regions except Asia was slightly worse than that experienced by Kering’s peers.
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