Kering Puts On Sale Sergio Rossi

The French multinational Kering has put on sale the Italian shoe maker Sergio Rossi because of its stagnation of the business and being unable to surpass competition.

Leeson. 24/02/2015
Sergio Rossi
Sergio Rossi

The great challenge of Kering this year that has just begun has a name: Gucci. After the unexpected changes in the management of its flagship, the market future of the French firm depends on the ability to show to re-boost sales of Gucci.

However, this is not the only challenge for the company in 2015. It should also address the situation of one of its footwear brands, the Italian manufacturer Sergio Rossi. When Kering recently published its results, it also announced that Rossi had been included within the «assets for sale». In fact, Kering has already provisioned the full book value of the subsidiary on 2014 results.

Sergio-Rossi-2014-2015
Sergio Rossi 2014-2015

However, this is not the only challenge for the company in 2015. It should also address the situation of one of its footwear brands, the Italian manufacturer Sergio Rossi. When Kering recently published its results, it also announced that Rossi had been included within the «assets for sale». In fact, Kering has already provisioned the full book value of the subsidiary on 2014 results.

Sergio Rossi, specializes in luxury women’s footwear, joined the group Kering (when it still was called KKR) in 1999. In its early years had a very positive performance, with an annual growth of the operating margin by double-digit until 2005. However, since that year the situation began to buckle, well behind the success of some of its main competitors, like Louboutin or Jimmy Choo. In that sense, the failure of Sergio Rossi has become even more evident as the segment in which it operates is in very good health. After nearly a decade with stagnant or declining sales, Kering announced that it is «analyzing all strategic possibilities for the company, including its sale.”

Sergio_Rossi_0054-1024x683
Sergio Rossi 2014-2015

Generally, this statement usually means that the subsidiary is put on sale and Kering will sell it if gets a reasonable offer. Furthermore, given that the book value of Sergio Rossi is already close to 0, it means that everything Kering gets from the sale will be capital gains, so we can think that its expectations are not very high.

Sergio Rossi 2014-2015

Kering shares have started the year very well. Since the departure of CEO and creative director of Gucci was announced in mid-December, the stock has risen 15% to its record, around €180 per share. Investors are rewarding the measures taken by the company to resume the upward trend of the business. The only inconvenience is that the company is currently trading at a PE ratio of 22.4 times, well above other companies (LVMH is trading at 14.1 times, for example). If Kering cannot beat forecasts, the current levels can act as a ceiling for the shares.

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