Kering shares pop as Gucci sees sharp sequential improvement

Shares of Gucci owner Kering jumped over 9% on Thursday, hitting a 1-year high after the company’s sales decline narrowed and quarterly earnings beat estimates.

The French luxury giant – whose brands include Gucci, Saint Laurent and Balenciaga – reported sales of 3.42 billion euros ($3.97 billion) for the third quarter, a 5% decline on a comparable basis from the same period a year earlier. It marked an improvement from the second quarter, when comparable sales fell 15% year-on-year.

Sales at Gucci, the firm’s biggest brand, fell 14% year-on-year on a comparable basis to 1.34 billion euros, with improvements at some of its smaller houses cushioning the blow for Kering.

The company noted that the decline at Gucci still represented sharp sequential improvement from the previous quarter, when the brand’s sales plunged 25%. Group sales had been expected to hit 3.31 billion euros in the quarter, according to a consensus compiled by FactSet, with Gucci sales — which typically make up close to half of Kering’s total revenues — forecast to come in at 1.32 billion euros.

Kering noted in its presentation on the third-quarter performance that currency fluctuations remained “a significant headwind,” with the sales decline including a negative currency effect of 5%.

Kering remains committed to turning the company’s performance around, CEO Luca de Meo said in a statement alongside the results. He added that the luxury giant’s “third-quarter performance, while representing a clear sequential improvement, remains far below that of the market.”

“This reinforces my determination to work on all dimensions of the business to return our Houses and the Group to the prominence they deserve. We are working relentlessly on our turnaround, as shown by our recent decisions.”

Earlier this week, Kering announced it had agreed to sell its beauty unit to L’Oreal for $4.7 billion as De Meo seeks to slash the firm’s debts and focus its efforts on its core fashion businesses.

On Thursday morning, Deutsche Bank upgraded its price target for Kering by 3.4% to 300 euros. Shares were last trading at around 340.45 euros.

“Importantly the better sales performance was across all major brands and with gross margin and opex guidance being held there is a good drop through to EBIT forecasts,” Deutsche’s Adam Cochrane said in a note.

“Looking at Gucci specifically the improvement was supported by leather goods where the handbag ranges were refreshed over the course of the last 18 months which should see support from carryover lines to the Demna inspired RTW launch in 1H 26.”

Analysts at UBS, meanwhile, said Kering’s report confirmed “the overall improving sector context but also the initial success of the actions taken by the management to turn the business around.”

“Net net, given that the equity story is centered around Gucci turnaround, bears may argue that Gucci in fact has improved at the same pace as other brands, thus suggesting limited evidence of its momentum outpacing the group,” they added.

Shares of Kering have surged around 33% so far this year, amid a boom in the luxury sector. However, stagnating sales, price rises, and renewed trade tensions have fueled questions about the outlook for high-end goods.

Last week, European luxury stocks, including Kering, rallied following a surprise return to growth from LVMH. The French conglomerate is seen as a bellwether for the wider luxury sector.

Kering has faced its own unique challenges, including weakening demand for its key brands and leadership changes. Investors were spooked by the company’s second-quarter earnings, which revealed a 25% plunge in Gucci sales.