Gucci Encourages Kering´s Profitability

Gucci revives and gives wings to its owner, the French group Kering. After several quarters of weakness, Gucci has shown in the fourth quarter the first signs of recovery under the new direction of the company, led by CEO Marco Bizzarri and creative director Alessandro Michele. Kering same-store sales rose 8% in the quarter, twice what analysts´ expectations. By brands, Gucci, which accounts for almost two thirds of total sales of the group, had its best quarter in three years, with an increase in sales of 4.8%, three times more than expected by experts

In annual terms, Kering revenues increased more than 15% to over €11.5 billion, while profit grew 30% to almost €700 million. One of the main reasons for the increase was the weakness of the euro, which has encouraged its figures (without the currency effect the increase would has been just 4%). Regarding the business brands, it benefited by Gucci, Yves Saint Laurent (presenting the highest annual growth of the group) and Puma, which after restructuring has also taken up the path of growth, and good progress in mature markets like Europe and Japan (+ 14%), which offset the weakness of China and its local market, France.  

These results have been very well received, because we have to keep in mind that the new collections led by Alessandro Michele have not yet exploited their full potential. In fact, it is expected that part of the new collection -mainly complements- is not fully distributed in their stores until the third quarter of this year. So far, the new products designed by Michele course weight just 30% of the total sales of Gucci.

Thanks to the evolution of its results, the stock has been able to climb in the stock market this year despite the global equity market situation. It is up around 2% and it is worth about €20 billion. It trades at a PER of 30 times, what is high compared to the industry average but justified on the positive forecasts for the company thanks to the recovery of Gucci. The 31 analysts who follow the stock recommend overweight with a potential target of 178 euros per share, 12% above its current market price.