Gucci and Kering are causing financial analysts to debate. Another collapse is feared in the first quarter of 2025 for the flagship brand of the Pinault family-led group. But some analysts think it’s an undervalued stock. Others are neutral and preach caution and patience, but others are pessimistic: They fear that Gucci’s sales could fall to 5 billion, half of what they were 3 years ago.
The future of Gucci and Kering
March 31 marked the end of the first quarter 2025. Slowing consumption in the US and stagnant consumption in China do not bode well for the luxury sector. Inevitably, Kering and its flagship brand (Gucci) find themselves in the eye of the storm. In recent days several companies have lowered the target price of the stock. RBC cut it from 260 to 240 euros as it expects Kering’s organic operating income to fall 13% to 3.93 billion euro in the first quarter of this year. While Gucci’s operating income is expected to plummet 26%. RBC’s rating is Neutral, and Bernstein’s is the same.
Analysts divided
Morgan Stanley and Citi also cut the target price: for JP Morgan, the indication is “sell”. In other words: the stock should be sold due to gloomy outlook. Jelena Sokolova of Morningstar, conversely, considers Kering a deeply undervalued stock. Nick Clay, manager of the TM Redwheel Global Equity Income fund, notes that the new creative director change will further delay the timing of the brand’s turnaround. “We have to be patient”, says Clay (source Morningstar).
Chinese pessimism
In China, where Gucci is most exposed, things look worse. They fear Gucci’s fall will continue in the first quarter 2025. Not only that, they consider it “a very daunting task” not to let the brand’s sales plummet to 5 billion euros in 2025. Practically less than half of 2022. The drop, notes the Ladymax portal, “if Demna’s creative direction brings positive changes, it could provide the company with some room for a recovery. But this is unlikely to happen before the end of 2025”.
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