PARIS — Kering shares soared on Wednesday after the French luxury group’s second-quarter results indicated its turnaround plan is gaining traction.
The better-than-expected performance of its star brand Gucci cheered investors, prompting a flurry of upgrades from analysts
More from WWD Kering shares rose 15 percent to hit an intra-day high of 289 euros, up from a close of 250.50 euros on Tuesday, leading a mixed performance by luxury stocks. By comparison, Hermès International fell by more than 12 percent as markets predicted a normalization in its growth rates following second-quarter results in line with analyst forecasts. HSBC upgraded Kering to “buy” and raised its target price to 340 euros from 290 euros.
Anne-Laure Bismuth, head of consumer luxury and sporting goods research at HSBC, said it doesn’t expect Gucci to return to growth this year, but the arrival in stores in mid-July of creative director Demna’s first full collection should sustain momentum at the brand, which is seeing early uptake among U.S. consumers in particular. Gucci, which posted a 2 percent organic sales drop in the second quarter, could return to positive sales growth in the last three months of the year, she said. “We believe the group is focusing on the right priorities to regain momentum and reengage with the aspirational customers particularly for the Gucci brand, with a focus on product creativity, quality and competitive pricing,” Bismuth said in a research note. Luca Solca, analyst at Bernstein, similarly homed in on Kering chief executive officer Luca de Meo’s remarks indicating that Gucci has revised its pricing to correct the phenomenon some analysts have termed “greedflation.” “Gucci is competitively priced on the new products, and we have also, in a few cases, repositioned some of the products, because I have the feeling that in some categories we went too far,” de Meo said. “Sometimes that had a very big impact on the volume, so the elasticity was not exactly linear: it…