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04 Oct 2022
Gucci helped by easy comp in 3Q, reversing in 4Q
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Gucci helped by easy comp in 3Q, reversing in 4Q
Kering (KER:EPA), 0 | Kering SA (KER:PAR), 0
- Published:
04 Oct 2022 -
Author:
Grippo Melania MG | Belge Antoine AB | Charchafji Anthony AC -
Pages:
13
Easier 3Q comps at Gucci to be supportive. Saint Laurent and other Houses still doing well
On 20 Oct, we expect Kering to publish 19% y/y reported revenue growth broken down as 11% organic and 8% FX. We foresee Gucci up 11% organic. By comparison, we have 16% at LVMH (19% FandLG). In 3Q21, Gucci''s aficionados were willing to wait to Oct-Dec to buy the long-awaited Aria collection, building up an easier comp basis for this year. For Gucci, we forecast the US to be down 6%, partially offset by robust sales to Americans abroad, contributing to 67% growth in Europe. Asia should be less negative (-2%) due to less Covid disruption in China. On a 3yr-stack we have Gucci retail accelerating to 15% (from 12% in 2Q).
It gets tougher in 4Q
Since June, we have taken the view that the inevitable luxury slowdown will become visible in 4Q22, hitting Gucci when the brand will still be in a transition phase. However, the rest of its portfolio should allow Kering to post 4% EPS growth in 2023. It will get tougher in 4Q on the macro side but also because Gucci will face a ''wall of comp''. Last year the brand had the new Aria collection (deferring sales from 3Q to 4Q), the House of Gucci movie and its 100-year Anniversary. We expect Kering to post c. 0.4% organic growth in 4Q, with Gucci at -3%.
14x 2023 PE for Kering is (too) cheap. We reiterate our OP rating, TP EUR 650
We understand investors'' concerns around Gucci with the brand in a transition phase during a tougher period. However, at current valuation, the risk/reward is definitely attractive. 29.3% FY22e EBIT margin (higher than LVMH), 6% FCF yield and EUR 2bn net cash ex leases - at 14x 2023 PE... Discount to LVMH is now at 35%, vs 5yr-average of 21%. With growing impact on sales and profit from houses like Saint Laurent and Balenciaga, there is now More to Kering than just Gucci. In this report, we fine-tune 3Q/4Q22 phasing, lowering our 2022-25 EPS by 1%. We maintain our Outperform recommendation, with a TP...