Kering: Oddo BHF cuts TP

(CercleFinance.com) - The analyst believes that the figures released last night come as no major surprise, with Q1 2024 sales reaching E4,504m, -10% in organic terms (Oddo BHF was expecting just less at E4,490m/-10% and the Visible Alpha consensus just more at E4,514m/-9.
6%).

Following this publication, Oddo BHF has lowered its target price for the share from E384 to E345, remaining cautious on Gucci's outlook. The broker maintains its Neutral rating on the stock.

Retail sales fell 11% (Q4: -2%), with declines of 11% in the Americas (Q4: -11%), 9% in Europe (Q4: -8%) and above all 19% in Asia Pacific (Q4: +8%). Japan, buoyed by Asian tourism, grew by 16% (Q4: +13%).

In brands, as previously announced, Gucci's decline was most marked at -18% y/y cc, with retail down -19%, reflecting a -28% decline in the Asia-Pacific region. Indeed, all brands suffered from poorly oriented traffic in China, Oddo BHFpoints out.

Saint Laurent's retail sales were fairly weak at -4% (they were stable in Q4 2023), which, after taking into account a sharp decline in wholesale, resulted in a 6% drop in total sales (we were expecting -3% with retail sales at -1%).

The Group is not overly optimistic about Q2. The start of the quarter does not show an improvement in the trend in Asia Pacific (China), and there is no reason at this stage to expect a clear improvement in the trend for Gucci in this quarter. It also says that it does not expect a margin recovery in H2 on the back of an improved business trend of more than 100/150 bp compared with H1, Oddo BHF adds in its daily comments.

The broker also lowers its EBIT forecast by almost 15% for 2024/2025/2026. Analysts now expect Gucci to post a 16% decline in Q2 (-10% pre), with a very timid return to profitability in H2 (-2% Q3 +3% Q4). Our H1 margin forecast for this brand falls to 22% from 28% (H1 2023: 35.3%) and expect a moderate recovery to 23.5% in H2, resulting in a 2024 margin of 22.8% (we were expecting 29.1% after 33.1% in 2023).

For the whole group, 2024 sales are expected to decline by 2.8% organically (-0.5% prec.) (Q2 at -8%, Q3 at +3%, Q4 at +6%) with an EBIT margin of 18.2% vs. 21.5% prev. (24.3% in 2023), the analyst adds.

For 2025 and 2026, the broker expects organic growth to reach +7.1% and +6.9% respectively, with group EBIT margin gradually rising to 19.5% (22.4% prev.) and then 20.6% (23.2% prev.).


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