Kering shares surge 15% on better-than-expected Q2 results

Source: WWD Author: Joelle Diderich Reading Time: 4 min

PARIS — Kering shares surged on Wednesday after the French luxury group's second-quarter results signaled that its turnaround strategy is gaining momentum.

The better-than-expected performance of flagship brand Gucci buoyed investor sentiment, triggering a wave of analyst upgrades.

Market Performance

Kering shares rose 15 percent to an intra-day high of €289, up from a close of €250.50 on Tuesday, leading a mixed session for luxury stocks.

In contrast, Hermès International fell more than 12 percent as markets anticipated a normalization in its growth rates following second-quarter results that met analyst forecasts.

Analyst Reactions

HSBC

HSBC upgraded Kering to "buy" and raised its target price to €340 from €290.

Anne-Laure Bismuth, head of consumer luxury and sporting goods research at HSBC, noted that while Gucci is not expected to return to growth this year, the arrival in stores in mid-July of creative director Demna's first full collection should sustain momentum. Early uptake has been particularly strong among U.S. consumers.

Gucci posted a 2 percent organic sales decline in the second quarter but could return to positive sales growth in the final three months of the year, Bismuth said.

"We believe the group is focusing on the right priorities to regain momentum and reengage with the aspirational customers particularly for the Gucci brand, with a focus on product creativity, quality and competitive pricing."

Bernstein

Luca Solca, analyst at Bernstein, highlighted comments from Kering CEO Luca de Meo indicating that Gucci has revised its pricing to correct what some analysts have termed "greedflation."

"Gucci is competitively priced on the new products, and we have also, in a few cases, repositioned some of the products, because I have the feeling that in some categories we went too far," de Meo said. "Sometimes that had a very big impact on the volume, so the elasticity was not exactly linear: it was exponential."

Bernstein raised its price target to €270 from €220, reflecting growing confidence in the strategic turnaround plan unveiled by de Meo during a Capital Markets Day in Florence in April.

"Gucci's new and more realistic take on pricing, product and positioning seems the most important reason for its quick revenue stabilization," Solca said.

Bernstein also praised Gucci's "bold willingness" to cut the price of its Mercato Tote Bag in early May, following a global slowdown in luxury spending that has seen an estimated 70 million aspirational consumers exit the market since 2023.

"Moving down to meet customers, as opposed to pulling them up on mere creativity, is not necessarily bad — assuming genuine brand desirability develops from faster brand momentum. There is a huge audience of 'luxury orphans' that Kering — and accessible luxury players — can take care of."

RBC

RBC increased its price target to €350 from €340 following the first-half results, which it described as "early confirmation of stabilization under new leadership."

TD Cowen

Oliver Chen at TD Cowen expressed enthusiasm about Gucci's leather goods segment, which returned to growth in the second quarter, supported by the launches of the Borsetto and Paparazzo bags.

"We see compelling and more alluring storytelling is back at Gucci and new styles including the Paparazzo have the ri..."