The Gucci handbag enjoys an iconic status in the fashion world. The Italian company's marketing strategy has contributed significantly to this - Gucci advertises its leather goods with prominent models and stars from sport, film and music. A campaign with Debbie Harry is currently running. On posters and in commercials, the singer of the cult band "Blondie" is wearing a handbag that, significantly, comes from the "Gucci Blondie" collection. Gucci could do with a sales boost triggered by the New Wave icon. In the third quarter of 2024, sales shrank by a quarter to EUR 1.6 billion on a comparable basis. The traditional house thus contributed significantly to the weak performance of its parent company Kering. For the period from July to September 2024, the French luxury conglomerate recorded a 16% decline in revenue to EUR 3.8 billion.
Kering is feeling the full impact of the slump in the high-end designer fashion, jewelry and accessories business. Customers in the Far East and China in particular are holding back. In the important Asia-Pacific region, Kering's sales slumped by 30% in the third quarter. CEO François-Henri Pinault also shocked the markets with a profit warning. In 2024, Kering's operating result could almost halve to EUR 2.5 billion. The top manager had previously predicted a 30% drop in profit for the second half of 2024. From this, Reuters calculated a forecast annual result of just under EUR 3 billion. "We are undergoing a far-reaching transformation of the Group, particularly at Gucci - at a time when market conditions are unfavorable across the luxury sector," explained the CEO. Pinault has been at the helm of the group, which includes top brands such as Yves Saint Laurent, Balenciaga and Bottega Veneta in addition to Gucci, for almost 20 years.
Kering is having a tough time not only with customers, but also on the stock market. The share is trading more than a third below its level at the end of 2023. In November, Kering fell to its lowest level since the beginning of 2017. Recently, however, the French large cap was able to make up ground. At the beginning of December, Kering was on the winning side along with competitors such as LVMH, Prada and Richemont. Several research houses had previously expressed cautious optimism about the luxury sector. These included Deutsche Bank. Its analysts expect a change of favorites in 2025. Unlike in the past two years, luxury stocks could overtake those from the retail and sporting goods sectors. Deutsche Bank bases its assessment on the return of the buying mood in China. The government's economic stimulus package should bear fruit here. Meanwhile, the experts do not expect the possible new US tariffs to have a negative impact on the luxury segment. Kering is one of Deutsche Bank's favorites.
Realignment after barrier breach
The positive rating, together with the recent price recovery, suggests that Kering should be given a "second chance". Investors whose portfolio includes the share via a barrier reverse convertible could also consider this. If the barrier has been breached and Kering has "worst performer" status, a rebound to the strike price is required. This is the only way to avoid losses. Recovery products offer an alternative to "wait and see". Among other things, Leonteq has issued several discount certificates with a European barrier on Kering. These structures trade well below par. As soon as the underlying ends the term above the barrier, investors receive the full nominal amount back. Depending on the structure, even a slight recovery in the battered luxury stock may be enough for the discount certificate to generate the maximum return. If this calculation does not work out and Kering is quoted at or below the barrier at expiry, shares are delivered in accordance with the exercise ratio. Leonteq has new callable BRCs on Kering for investors who would like to bet on the classic after the barrier event.
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