Are Kering Shares Set For a Turnaround?

Kering shareholders have endured a difficult few year, as the decline that began back in 2021 has seen more than 65% wiped off the share price (EPA: PRTP). Some mild bullish sentiment since the start of this year, with Kering's stock having added 4.90% on a year-to-date basis, with a positive earnings call also potentially giving bulls something to smile about.

The parent company of the luxury brand Gucci, held a conference call to discuss its full-year financial results alongside its strategies for future growth and stability. During the call, several important points were highlighted about the company's expectations and plans.

The luxury group set out its vision for 2025, presenting it as a year of stabilisation. Kering aims to keep operational expenditure growth flat, achieving this goal through a consistent advertising and promotion budget and a 5% reduction in costs via enhanced efficiency measures.

Despite the lack of specific revenue or margin guidance for Gucci, Kering outlined several strategies, including a 30% reduction in wholesale activities and the closure of some directly operated stores and outlets. These measures are geared towards cost-cutting and efficiency improvements. Additionally, the company anticipates mid to high single-digit like-for-like growth in full-price stores, expecting this increase to happen gradually over the year.

Designer Sabato De Sarno's arrival is perceived as pivotal, marking the end of Gucci's transitional phase with an intention to enhance its appeal. However, Barclays analysts remain doubtful about Gucci’s growth and margin prospects. Currently, Gucci’s sales are declining by around 25%, a stark difference from Barclays' forecast of a 13% decrease.

Analysts consensus on price target remains awfully close to current price action, leaving little room for upside according to the street. These PT's are notoriously fickle however, and there could be shifts in the days and weeks ahead as markets digest the latest numbers.

With modest profitability projected for the year's first half and stronger performance anticipated in the second half, Kering has set a cautious yet optimistic tone for its future. Notably, concerns persist regarding the feasibility of achieving a stable EBIT for Gucci, a factor that analysts—and likely investors—will closely monitor.

Whether the stock can truly reverse fortunes in the short term may be a tad optimistic according to the street, yet the tide could be turning for an end to the decline if stabilisation efforts can be executed to plan.