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Kering stock: What next for KER share price after Balenciaga saga?

By Jenny McCall

14:19, 6 December 2022

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EL
Estee Lauder
271.04 USD
-2.38 -0.870%
KER
Kering
560.00 USD
0.2 +0.040%

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A image of Kering CEO François-Henri Pinault
Kering CEO François-Henri Pinault (pictured) is facing the pressure right now - Photo: Getty Images.

It’s a tough time right now for the French luxury designer brand, Kering (KER), which is facing huge pressure, as one of its fashion groups Balenciaga published a controversial campaign causing the stock price to fall. 

The fallout began on 16 November, when Balenciaga released a series of ads featuring a teddy bear in leather gear, which was likened to S&M ensemble. One of the pictures showed a young girl holding a bear dressed in restraints and including a lock and chain around its neck.

KER stock price fell by more than 1% on 16 November and accusations of child exploitation followed.

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Kering (KER) stock price chart

A host of blunders and scandals - how will KER stock cope?

So, it’s clear this saga is not just affecting Balenciaga's reputation, but also Kering's stock price.

With that said, analysts are still optimistic about the stock.

KER stock recently received a €555 ($566.33) price target from equities research analysts at Barclays. This price target represents a potential upside of 1.78% from the company’s current price.  

But the share price has been down 22% this year and this latest Balenciaga scandal could hinder KER stock, leaving CEO François-Henri Pinault with a problem on his hands. 

On 22 November Balenciaga released an apology and said legal action would take place against the “parties responsible for creating the set.”

Balenciaga tried again to claw back some credibility and released another statement saying: "This was a wrong choice by Balenciaga, combined with our failure in assessing and validating images. The responsibility for this lies with Balenciaga alone."

The controversary has resulted in celebrities, such as Kim Kardashian saying: “I have been quiet for the past few days, not because I haven’t been disgusted and outraged by the recent Balenciaga campaigns, but because I wanted an opportunity to speak to their team to understand for myself how this could have happened." 

Kardashian went on to say that she is now “re-evaluating" her relationship with the brand.

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Perhaps Kering will also be looking to re-evaluate how its relationship and ownership of Balenciaga will affect its overall company perception and share price?

But where is KER?

Kering has been grabbing headlines recently, with its pursuit of Tom Ford, which seems to have fallen flat due to beauty brand Estée Lauder (EL) putting a bid in last month. Meanwhile, the company's decsion to sack its creative director of Gucci, Alessandro Michele was big news, as Gucci contributes a huge amount of revenue to Kering.

Back in February, KER reported revenue for its 2021 full year earnings of €17bn and Gucci’s annual revenue amounted to €9.7bn, an increase of 31% versus 2019 figures.

Many are asking how the fashion group will deal with this latest scandal and Kering has, as yet, stayed silent behind the scenes as Balenciaga faces the backlash.

Kering, which owns major fashion brands such as Gucci, Saint Laurent, and Alexander McQueen, has always seen Balenciaga as a rising star in its portfolio.

But this latest scandal could not only tarnish Balenciaga, but could also be of harm to Kering.

Analysts still optimistic about KER stock

Nevertheless, analysts surveyed by MarketBeat seem unfazed by this latest scandal. 

"Wall Street analysts have issued 12-month price objectives for Kering's shares. Their KER share price forecasts range from €520.00 to €785.00. On average, they anticipate the company's stock price to reach €637.00 in the next twelve months. This suggests a possible upside of 13.8% from the stock's current price," MarketBeat analysts said. 

Whether, KER stock pays the price for Balenciaga's mistake remains to be seen, analysts seem optimistic about the fashion group's future. With that said, a scandal like this can leave a lasting imprint on stocks and it is clear some organisational changes need to be made, if blunders like this are to be avoided in the future. 

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