On Thursday, JPMorgan (NYSE:JPM) adjusted its outlook on Kering (LON:0IIH) (EPA:PRTP) SA (KER:FP) (OTC: PPRUY) stock, reducing the price target to €285 from the previous target of €325, while maintaining a Neutral rating.
The firm's analyst highlighted that Kering's first-half 2024 results were largely expected, aligning with the April warning, with no significant improvement from the first quarter. Year-over-year, the company's EBIT for the first half dropped by 42%.
In the details of Kering's performance, the luxury goods company saw continued challenges within its brand portfolio. Gucci, one of Kering's flagship brands, did not show signs of recovery, experiencing a slight year-over-year decline. Additionally, Yves Saint Laurent (YSL) slowed down further, and both YSL and Bottega Veneta faced substantial margin pressures, more severe than anticipated.
Kering has also updated its forecast for the second half of the year, now expecting a 30% year-over-year decline in Group EBIT. This is a significant revision from JPMorgan's initial estimate of a 9% decrease.
The revised outlook suggests that a sales rebound at Gucci will be delayed longer than previously expected, with projections indicating high single-digit declines persisting into the fourth quarter.
The downgrade in Kering's financial forecast has prompted JPMorgan to revise its own projections for the company. The firm now predicts double-digit reductions in Kering's EBIT and EPS, with an 11% to 12% decrease in EBIT and a 13% to 14% fall in earnings per share. This reassessment reflects the broader challenges faced by the luxury sector, as indicated by the firm's current trading observations.
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