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Kering stock forecast: Will 2023 bring better fortunes for fashion giant?

By Ryan Hogg

Edited by Jekaterina Drozdovica

15:38, 30 December 2022

Kering logo on the website homepage.
What is the latest Kering stock forecast for 2023 amid big internal shifts? Photo: Casimiro PT / Shutterstock

Kering (KER) stock is at a crossroads as it enters 2023. Strong earnings reported in October have clashed with continued stutters in its target growth markets amid Covid-19 lockdowns, compounding heavy losses in share value this year.

Kering (KER) live stock price

Will a creative change at stalwart Gucci help jolt the company’s share price back to life, or will macro headwinds, as well as a PR blunder at Balenciaga, keep the company subdued next year? Here we take a look at what factors are shaping Kering stock forecast for 2023 and beyond.

What is Kering? 

Kering is a luxury fashion group that operates across the globe. Founded by François Pinault as timber trading company Établissements Pinault in 1963, the group made a shift towards luxury in 1999 when it bought a 42% controlling stake in Gucci, now a cornerstone of the company’s business.

The company went public after an initial public offering (IPO) placed it on the Paris Stock Exchange on 25 October 1988. Its main subsidiaries include Gucci, Saint Laurent, Bottega Veneta and Balenciaga. 

It directly operated more than 1500 stores at the end of 2021, around half of which were in emerging countries. The company makes most of its income from the luxury sector, bringing in revenues of nearly €18 billion in 2021.

Kering has slowly added more luxury fashion houses to its portfolio over the last two decades through a series of acquisitions, the last being for jewellery brands Pomellato and DoDo in 2013. 

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Kering stock suffers through bear market

KER stock price has historically been driven by cyclical economic factors, with the luxury fashion group vulnerable to events that might affect demand, similar to the wider retail sector. Kering stock forecasts tend to track macro factors, but it has also been driven by internal growth.

The stock saw its biggest appreciation in 2017 during an exceptional individual year for sales, with Gucci’s growth five times higher than the rest of the luxury retail industry.

The group saw its share price peak in August 2021 at €788.90, as the brand benefited from strong sales growth within a wider bull market — both of which were linked to heavy liquidity following Covid-19 restrictions and the downstream of huge government stimulus.

Kering stock price, 2017 - 2022

Kering stock is down 32.8% this year as a bearish market hurts confidence across the globe. The context of high inflation and rising interest rates has brought particular scepticism towards sectors reliant on discretionary spending, explaining contractions in value seen across Kering’s competitors, MarketBeat data as of 30 December showed. 

Recent Kering stock news has been somewhat more troubling, with a blunder at Balenciaga — in which the group ran advertisements showing children holding teddy bears in bondage gear — helping to offset good gains experienced in the wake of a strong earnings report. The stock closed on 29th December at €482.60, a 1.3% rise over the day.

In a statement on its Instagram page, the brand admitted it had made a collection of “grievous errors” which led it to run highly controversial ads.

Gucci remains biggest revenue force

While the company’s share price has weathered some turbulence this year, underlying fundamentals appear to be strong. But there are signs that economic pressures could be starting to cut through.

The company beat analysts’ expectations for the third quarter of 2022, according to analysis from Reuters, with currency-adjusted sales growth of 14%.

Sales growth of 9% at the company’s biggest revenue generator, Gucci, was below the 11% consensus, disappointing analysts, according to Reuters.

Kering's finance chief Jean-Marc Duplaix said in a webcast that Gucci’s performance in China had been mixed and "has yet to normalise”, a reminder of consumption issues in the country linked to Covid-19. 

Indeed, this “mixed” performance contributed to Asia Pacific’s share of total group revenue falling by 2 percentage points compared with the same period last year, as other regions succeeded in emerging out of Covid-19 restrictions.

More headwinds to come in 2023 

There are plenty of headwinds for Kering to be wary of as it enters 2023. Chief among them will be inflation and its downstream effects on the economy.

Consumer prices rose by 7.1% in November 2022, which, while showing signs of a slowdown, is still well above the US Federal Reserve’s (Fed) 2% target. It has been a similar story in Kering’s other markets across Europe and Asia, resulting in central banks across the world hiking interest rates.

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Thankfully for Kering, luxury brands tend to be more resilient to inflationary pressures. Sean Burke of Clarkston Consulting painted a picture of a sector that was relatively immune to price rises, with a specific Chanel bag rising 60% in the space of a year, leaving demand relatively unencumbered. However, Burke added that economic headwinds could push middle-class buyers back out of the luxury market.

Meanwhile, the company's growth in Asia has been a boon in recent years, helping it add organic revenue by breaking into a market that was previously largely untapped. But that growth has also been hampered by China’s halting emergence out of Covid-19. 

News from China remained mixed. While it is beginning to loosen Covid-19 restrictions, it faces a wave of new cases that may threaten Kering’s business there. China has already forced factories owned by Apple (APPL) and Tesla (TSLA) to temporarily cease production in the country, while Nomura research shared with CNBC found lockdowns were affecting more than 12% of the country’s economy.

Recent operational news at Kering involved a change in management. Gucci announced in November Alessandro Michele would be stepping down as the brand’s creative director. In the current context, at least some analysts regard this as good news.

In a note shared with Capital.com Barclays’ head of European luxury research Carole Madjo wrote: 

“In our view, a drastic change was needed to rejuvenate the brand especially now that Gucci’s strategy is to focus more on its timeless offering while Michele’s strength has especially been on the Fashion side.”

The biggest immediate headwind facing Kering though is the scandal that rocked Balenciaga through November.

The move forced internet mogul Kim Kardashian to say she was reassessing her relationship with Balenciaga after the fallout, delivering a blow to the company’s reputation and potentially its revenue.

Kering stock forecast for 2023 and beyond

In another note on the Kering share price forecast shared with Capital.com, Barclays’ Madjo wrote that a lack of momentum of the Gucci brand and the sense of brand fatigue which was particularly visible in China had forced the bank to cut its rating for Kering from Over Weight to Equal Weight (EW). She said:

“Looking at fundamentals, our view on the Gucci brand hasn’t changed. The brand is likely to continue to underperform peers in the short term as the perception of Gucci in the core Chinese market appears to have weakened. New Gucci management is now in place in China with the aim of elevating the brand, and we think this could take time to translate into better performance.”

The analyst added that in the Western market, Gucci could suffer from macro headwinds more than its peers, “considering that it is perceived as a more seasonal brand”. Madjo noted;

“EBIT margin has been on a downward trend for the past year and considering the investment that we believe would be needed to rejuvenate the brand, Gucci’s return to pre-Covid margin may not be a linear path.”

In its annual State of Fashion report, McKinsey highlighted some of the strengths of the Kering brand and its expansion to the east. 

“In luxury, Kering made an impressive rise through the ranks, driven by Gucci’s double-digit sales growth and strong performance in Asia–Pacific markets such as Japan,” the group wrote. 

Optimism around the Kering brand is echoed by analysts providing price targets in the last couple of months, all of whom put upside on the value of the company.

Based on 12 analysts’ outlooks in the last 12 months compiled by MarketBeat as of 30 December, the KER stock price was expected to be €627.17 next year. That represented a 31.6% upside on closing levels on 29 December.

The upside of that range of Kering stock forecasts for 2023 was a €785 target by Morgan Stanley at the start of 2022.

The most optimistic KER stock forecast delivered since the company’s latest earnings report came from Goldman Sachs, where analyst Louise Singlehurst pinned a €690 price target for 2023, 32% upside at time of forecast.

The lowest price expected by an analyst was a €555 target, a 1.33% upside at the time of Kering stock prediction prior to December’s tumble.

A Kering stock forecast for 2025 by algorithm-based forecasting service Wallet Investor as of 30 December suggested the stock will close out that year at €523.27.

Note that analysts and algorithm-based KER stock forecasts can be wrong and shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading, looking at the latest news, a wide range of commentary, technical and fundamental analysis.

Keep in mind that past performance does not guarantee future returns. And never trade money you cannot afford to lose.

FAQs

Is Kering a good stock to buy?

Kering appears to have some upside based on analyst targets compiled by MarketBeat as of 30 December, owing to strong potential in Asia Pacific after a challenging couple of years. But inflation, a potential recession and stuttered reopening in China pose risks. Remember, whether Kering is an appropriate investment for you would depend on your risk tolerance, experience in the stock market, portfolio goals and overall trading strategy. Always conduct your own research before trading as analyst views may be wrong.

How high can Kering stock go?

Based on 12 analysts’ outlooks in the last 12 months, as compiled by MarketBeat as of 30 December, the KER stock price was expected to be €627.17 next year. The highest forecast delivered for Kering stock was a price target of €785 from Morgan StanleyMnv mmm. The lowest price expected by an analyst was a €555 target.

Should I invest in Kering stock?

Whether Kering is an appropriate investment for you would depend on your risk tolerance, experience in the stock market, portfolio goals and overall strategy. Kering stock forecast is dependent on the path of several macroeconomic factors including inflation and interest rates, as well as internal decisions made by the company, particularly as Gucci looks for a new creative director. You should always conduct your own due diligence before choosing a stock to invest in.

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KER
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