Kering: Transitional Results

Kering, the world´s second largest luxury company will also publish its third quarter results on October 22. In this case, we should put more attention to the next quarter.

Leeson. 13/10/2015

Transitional results. That´s how we can define the third quarter results to be published by Kering on October 22. Transitional because most of the products sold by its flagship Gucci were designed by former creative director Frida Giannini, so many buyers have postponed their purchases until the new product line created by the new creative director Alessandro Michele be launch, in the fourth quarter.

Gucci 1
Gucci Ready to Wear. Click to buy

The impact must have been especially hard on the wholesale segment, as it does not want to have product «expired» waiting for such a major change. This, coupled with the apparent weak demand in Asia, will not allow the figures presented serve to draw many conclusions. According to market consensus estimates, Gucci´s sales in the third quarter fell 0.5% over the previous year. The strength of demand in Europe, both for economic recovery and by the intense flow of tourists, will partly compensate the negative influence of the two aspects mentioned above.

Puma 1
Puma by Rihanna. Click on the image to buy

The forecasts are not too optimistic for the rest of the group brands. In the case of Puma sales may grow 2%, just a third of the registered in the previous quarter. Bottega Veneta would also grow well below the previous quarter. No specific forecasts for the other brands, but the general tone of the group is slowing growth, primarily driven by Asia and changes in Gucci.

Bottega Veneta
Bottega Veneta Ready to Wear. Click to buy

In any case, it is important that this is more than discounted by the market, and we see that there are very low expectations for the quarter (just need to compare these estimates with which we mentioned for LVMH). Kering trades at a PER 2015 of 15x, with an EV/Ebitda ratio of 11x, appealing considering its historical averages. And regarding its market price, seems to have held up well the support of 140 euros per share, which has propelled it to the mark of 160 euros, virtually unchanged since the beginning of the year, while 7% up in 12 months.

(Featured Image: Alexander McQueen S/S 16)

Disclosure: The author is not responsible for the views expressed in the article. The text was written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.

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