Gucci parent Kering could be due a “big brand reset” following Wednesday’s profit warning on the back of waning demand for its leading brand, analysts have said.
Paris-based Kering warned like-for-like sales could drop by as much as 10% in an update earlier this week, with the figure falling by 20% among Gucci products.
“Given the magnitude of revenue declines, we believe this raises the prospect of a big brand reset, given old style product is selling through worse than expected,” RBC analysts said in a note following the update.
“Whilst that is likely to create more disruption in the near term, [it] has the potential to create a cleaner setup for new style ramp-up.”
That said, RBC acknowledged that Kering’s turnaround, which does not factor in such a reset, could still work.
However, Thursday’s update “pushed [this view] out further than initially anticipated,” analysts said.
RBC lowered Kering’s share price target from €480 to €440 as a result, with this marking a prospective rise of 19% from Thursday’s close.