Investing.com — Kering (EPA:) shares slipped in after-hours trading on Wednesday following weak third-quarter earnings, though the stock recovered slightly by early Thursday, trading 2% higher at €235.60.
The luxury group’s revenue dropped 16% on a comparable basis, to €3.8 billion.
“A slight improvement in recent weeks does not prevent a deeper H2 trough and a more gradual mid-term rebuild. An early confirmation of no changes to divi policy means heavier lifting is needed in 2025 to prepare for potential 2026 outflows,” said analysts from Jefferies in a note.
Gucci, Kering’s flagship brand, saw a 25% drop in comparable revenue, generating €1.6 billion. Sales were notably weak in Asia-Pacific, and wholesale revenue fell 38% due to a reduction in distribution channels.
“Gucci brand equity remains intact; however, it is mid-way through a painful repositioning at a challenging point in the broader luxury cycle. The impact of new product introductions will take until 2025 to be visible in our view,” said analysts from RBC Capital Markets in a note.
The brand’s performance is expected to improve with the introduction of new leather goods late in the quarter.
Yves Saint Laurent also posted a downturn, with revenue declining 12% on a comparable basis to €670 million. A slowdown in retail activity and a 20% drop in wholesale revenue weighed on the quarter, though new leather product launches are anticipated by year-end.
In contrast, Bottega Veneta was a rare bright spot, posting a 5% increase in comparable sales, driven by strong demand in North America and Western Europe. The brand’s leather goods collection performed well, contributing to a 9% rise in direct retail sales.
Other brands in Kering’s portfolio, including Balenciaga and Alexander McQueen, also struggled, with revenue from smaller houses dropping 14%.
Additionally, Kering warned of ongoing uncertainty in consumer demand and now expects 2024 operating income to reach approximately €2.5 billion, reflecting the difficult economic and geopolitical environment.
RBC Capital Markets added that they had anticipated a tough third quarter and some reduction in the expected earnings for 2024.
However, the short-term decline in earnings was worse than expected. They also expressed concerns about how earnings might recover in 2025, suggesting there could be further downward revisions.
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