PPRUF - Kering: Bottom Fishing Will Not Work With This Luxury Laggard

2024-02-15 09:40:50 ET

Summary

• Investors look to the luxury sector for powerful and historical brands that are more resilient in economic downtrends.
• Not all that glitters is gold, and investors must be choosy in a sector that was proven to be more fragmented and differentiated than what it seemed before 2023.
• Kering's results show consistent market share losses and significant inferiority, as it lags behind LVMH.
• Management's focus on real estate investments and expanding into new categories while its name brands in Gucci, Bottega Veneta, Yves Saint Laurent, and Balenciage, are all struggling, is worrisome.
• I reiterate a Hold rating for Kering, and encourage investors to wait on the sidelines until there are clear signs of improvement.

The luxury sector draws an appeal to investors, being somewhat secluded from the general economy and the mainstream of Wall Street.

With brands that go back more than a hundred years and customers that are generally immune to economic downturns, the sectors provide investors with a hedge, and exposure to European companies....

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