Kering share price reaches multiweek lows as Gucci underperforms

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Kering reported a like-for-like sales decline of 1.2% in the final quarter
Gucci, Kering’s largest brand, reported an 8.9% decline in sales in the third quarter.
Kering’s share price closed the week 5.67% lower, the worst weekly performance since June

The shares of Kering (EPA: KER), the owner of the Gucci brand, closed in the red on Friday, despite a recovery in sales, with more than 3%.

Kering said that sales of its luxury products showed a significant recovery in the third quarter thanks to rising demand in Asia and the United States. Comparable sales in the third quarter were relatively flat year-on-year as the Paris-based luxury goods company dwarfed consensus estimates.

Kering reported a 1.2% decline in like-for-like sales for the last quarter to September, a smaller decline than consensus estimates of 8-13%, following a 44% drop in the second quarter.

The company suffered a severe blow after the closures due to coronavirus-induced blocking, as did one of its biggest competitors, LVMH.

Sales recovered after the easing of restrictions and the reopening of stores, but some of the measures are being reintroduced in Europe as governments prepare for the second wave.

Kering’s CFO, Jean-Marc Duplaix, warned that the outlook remains highly uncertain. He also pointed out that Gucci had shown an incredible performance in the US and China, but was still affected by global travel restrictions.

“Gucci has perhaps suffered more than others from the lack of tourist flows,” Duplaix said.

Gucci has recently been one of the fastest growing luxury fashion companies, with like-for-like sales down 8.9% in the third quarter, while other Kering fashion companies reported growth, notably Bottega Veneta, whose sales increased by 21%.

Gucci accounts for almost 60% of Kering’s revenues, with investors closely watching the brand, which may lose momentum after a major success with creative director Alessandro Michele.

“The key question for Kering is how quickly and effectively Gucci will be able to renew itself,” said Luca Solca, analyst at Bernstein.

Technical analysis: Worst weekly performance since June

Kering’s share price closed the week 5.67% lower, its worst weekly performance since June. More importantly, the sellers managed to break the rising 7-month trend line at €565.

Daily chart of the Kering share (TradingView)

This is likely to put additional selling pressure on KER, as buyers have gained almost 30% in the last 3 months. As a result, a correction is likely to occur as sellers are targeting a trip to €535.

Summary

Luxury fashion brand Kering said its sales recovered dramatically in the third quarter, but also highlighted Gucci’s underperformance. Kering’s share price fell nearly 6% this week as investors were disappointed with Gucci’s sales figures.

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