Kering SA (EPA:KER) joined fellow luxury goods supplier Burberry in the doghouse as it got a downgrade from two City investment houses.
Burberry hit a fifteen-year low on its downgrade from Barclays, but the bank also downgraded Gucci-owner Kering which hit a seven-year as it also got a downgrade from Canadian bank RBC.
RBC said “The luxury environment is incrementally softening, which is likely to have an outsized impact on Gucci, given it is currently straddling old and new product mix, as it transitions to a new design aesthetic.
“As a result, we believe potential turnaround timing continues to lengthen, and our estimates do not anticipate Gucci returning to positive revenue growth until the second half of 2025.
Longer term it remains optimistic: “We maintain our view that Gucci remains a top-tier soft luxury brand, with one of the largest revenues in the industry. Website traffic trends are also getting incrementally less negative.”
Barclays meanwhile cut its stance on Kering to 'underweight' as, like RBC, it sees China weakness further delaying any recovery.
“On the back of our China trip, we learnt that Gucci continues to suffer heavy sales decline in China, more so than peers and feedback from industry experts were quite pessimistic about the potential impact of the new product offering.
“Based on this and as China's macro environment has deteriorated further, we think that Gucci's recovery story could be delayed and don't expect the other brands (Saint Laurent, Bottega Veneta, Balanciaga) significantly to offset the Gucci weakness.”
Shares fell 1.9% to €231.75.