RBC downgrades Kering but still sees solid potential via Investing.com

Investing.com – Shares of the French luxury group Kering SA (EPA: ) fell last week, continuing the downward trend of recent months, and closed on Friday at €236.25, its lowest level since April 2017, as more analysts downgrade their recommendations on the stock.

Today, it’s RBC Capital Markets’ turn to downgrade Kering from ‘outperform’ to ‘sector perform’, with its price target cut to €290 from €310 previously. This still represents a potential upside of 22.7% from Friday’s closing price.

To justify this more pessimistic outlook, RBC analysts pointed out that the luxury market is showing signs of slowing, which could affect Gucci in particular. As the brand transitions to a new design aesthetic, it currently falls into the mix of old and new products, complicating its performance.

The timing for a sales rebound is thus extended, with forecasts predicting a return to positive growth only from the second half of 2025. As a result, RBC has revised down its 2025 earnings forecast, with EPS estimates down 7% than consensus forecasts.

The RBC report also indicates that Gucci’s revenue trends should remain negative through the third quarter of 2025 due to declining demand for luxury goods and the lagged effect of new product integration. This situation is also likely to put pressure on EBIT margins, which are expected to decline by 100 basis points in the first half of 2025, before a slight improvement towards the end of the year, according to RBC.

Analysts also estimated that Kering’s revenue for fiscal 2024 should fall by 9.7%, with operating margins also under pressure. In contrast, modest organic growth of 3.3% is expected for 2025, well below market expectations. RBC’s revenue estimates for Gucci are thus 6% lower than consensus forecasts for 2025.