Shares of Kering SA (FR:KER) gained 4.9% yesterday after the luxury goods maker beat Q4 FY23 sales estimates and announced long-term revival plans. Kering has suffered a setback in sales as price-sensitive consumers have abandoned the purchases of luxury goods. Nonetheless, CEO François-Henri Pinault reiterated the company’s focus on driving long-term growth through continued investments in its prestigious brand Gucci, even if it leads to short-term margin pressure.
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CAC 40-listed Kering SA is a French multinational luxury goods company offering clothing, leather goods, watches, and jewelry. Kering boasts some ultra-premium luxury brands such as Gucci, Balenciaga, and Yves Saint Laurent (YSL). KER shares have lost over 29% in the past year.
Details of Kering’s Results
In Q4 2023, Kering’s revenue fell 6% year-over-year to €4.97 billion, but came in higher than the consensus of €4.94 billion. Sales from directly operated retail networks fell 2% on a comparable basis. Asia Pacific and Japan were the stronger contributors to total revenue. For Q4, sales from each of Gucci, YSL, Bottega Veneta, and Other Houses showed an 8% year-over-year decline.
For the full year of Fiscal 2023, revenue fell 4% to €19.57 billion as sales from Wholesale and Other revenue declined 11% on a comparable basis. Also, recurring operating income for the full year collapsed by 15%. On a comparable basis, sales from both Gucci and Bottega Veneta fell by 2%, YSL fell by 1%, while sales from Other Houses declined by 8%. Remarkably, Kering Eyewear and Corporate revenues grew 11% on a comparable basis.
Kering CEO Warns of Short-Term Downfall
Looking ahead, Kering is determined to drive its long-term profitability growth by foregoing short-term benefits. Pinault said that Kering will continue to invest in the development of its Houses to strengthen their desirability and exclusivity, enhance quality and standard, and improve customer shopping experience.
Kering did acknowledge the unfavourable geopolitical and macro environment and warned that its investments in brands will hamper its Fiscal 2024 recurring operating income. This will further reduce Kering’s margins and performance in 2024 compared to 2023 since the company will prioritize expenses and investments.
Is Kering a Good Buy?
Following the results, two analysts reiterated a Hold rating on KER shares and kept their price targets intact. Meanwhile, RBC Capital analyst Piral Dadhania reiterated a Buy rating on KER with a price target of €500 (21.5% upside). The analyst was relieved that Gucci’s performance was not “worse than expected.”
Overall, with two Buys versus eight Holds, KER stock has a Hold consensus rating on TipRanks. The Kering SA share price forecast of €446.67 implies 8.5% upside potential from current levels.
