Gucci beat sparks Kering rally as luxury rivals fail to impress
Kering Surges on Gucci's Performance Amid Mixed Luxury Sector Results
July 29 (Reuters) - Shares in Kering surged as much as 11% after flagship brand Gucci delivered better-than-expected quarterly sales, lifting hopes that CEO Luca de Meo's turnaround efforts are gaining traction even as results from rivals left the market cold.
Kering's stock was up 11.8% at €279.90 ($319) by 0800 GMT, on track for its best trading day since mid-January 2025, after strong U.S. demand for its new handbags lifted Gucci sales and amid concrete debt-cutting efforts by de Meo.
Analyst Reactions and Market Sentiment
"We believe the group is focusing on the right priorities to regain momentum and re-engage with the aspirational customers particularly for the Gucci brand," HSBC analysts said in a note to clients, upgrading the stock to "buy" from "hold".
Luxury Rivals Struggle to Impress
LVMH's Muted Performance
A relatively muted sales improvement at industry bellwether LVMH failed to excite investors on Tuesday amid lingering questions over whether the $400 billion luxury industry may be finally emerging from a prolonged downturn, despite spending by U.S. tech millionaires and renewed demand for jewellery.
LVMH shares opened up 3% on Wednesday after a wobbly trading session on Tuesday.
Hermes' Modest Growth
Birkin bag maker Hermes reported on Wednesday only a slight acceleration in organic sales, sending its shares down over 4%.
Gucci Turnaround Gathers Momentum
Q2 Results Exceed Expectations
Gucci's second-quarter revenue dipped 2% on an organic basis, the brand's 12th straight quarterly sales drop, but the result beat analysts' forecasts and was a significant improvement from the previous quarter.
De Meo's Revival Strategy
Once Kering's profit engine but recently experiencing years of weakening demand, Gucci aims to return to full-year growth this year, as part of de Meo's plan to revive the €30 billion French conglomerate's fortunes.
Store Closures and Inventory Reduction
The plan includes 100 store closures by year end and a €1 billion cut of the group's inventories within 12 months. De Meo said in April he aims to turn Gucci into a "fully client-obsessed organisation" with fewer stores but a better understanding of its clients across regions.
Growth Outlook and Analyst Expectations
On Tuesday he said the brand's growth will not be linear and the third quarter, which analysts expected to be a turning point, may be "flattish".
The brand will require a strong upward swing in sales in the second half to meet its goal to return to full-year growth, RBC analysts said in a note.
Additional Information
($1 = 0.8771 euros)
(Reporting by Alessandro Parodi in Gdansk; Editing by Milla Nissi-Prussak and Jan Harvey)