Goldman Sachs downgrades Kering, Gucci to blame

Goldman Sachs Group Inc. has downgraded Kering stock to “Sell” in analysts note revealed to clients on Sunday morning, and has set one year TP at EUR 136.80. This target is -4.13% from PPX’s last price.

This stock rating downgrade was noticed by equity traders, as ETR:PPX is currently trading 0.00% lower at EUR 0.00 as of 04:41 Frankfurt time. Kering’s stock is up 2.37% in the past 200 days. It has outperformed the S&P 500, which has declined -6.36% in the same time.

Goldman analyst William Hutchings said Gucci has overexpanded its store network and the current turnaround strategy will take time. He wrote, “We see limited offsets from the rest of the portfolio and believe consensus expectations for 7 per cent group revenue growth and 130 [basis point] margin uplift as a challenge.”

Goldman’s comments about there being too many stores is underscored by Credit Suisse’s analysis from June, when the bank noted that store count increased by 70 percent between 2009 and 2013, but units sold per store dropped by half.

Credit Suisse suggested that the reason behind the drop in traffic was due to increasing prices and loss of brand appeal among the Chinese. Gucci doesn’t seem to be at the top of the shopping list of luxury bags for Chinese, but Louis Vuitton still remains a desired brand.

Goldman said Kering’s second-quarter revenue outperformance was significantly led by promotions and that it would impact future.

Kering Group