(News Bulletin 247) – The Sino-British bank lowered its advice to “hold” from “buy” on the stock, not seeing a catalyst on the horizon for the action before the next intervention by Luca de Meo in mid-February.

“Easy tiger” (“Calm down, big guy!”). This is how HSBC titles its note dedicated to Kering, this Friday, October 24.

The Sino-British bank refers to the impressive rally experienced by the stock of Gucci’s parent company: +120% since its low reached on April 9 and especially +100% since the appointment of Luca de Meo, then boss of Renault, as general manager in mid-June.

The Italian leader, who arrived at the helm of Kering last month, brought a certain momentum to the luxury group, giving a proactive and energetic speech, assuring that he would be “rapid, efficient and decisive”.

A series of sharp and market-appreciated decisions followed. Kering has postponed the potential takeover of Valentino until 2028 at the earliest, appointing Francesca Belletini as CEO of Gucci but also Thomas Cuntz (director of “talent development”) and Philippine de Schonen (director of financial communications), two senior executives who worked alongside Luca de Meo at Renault.

No catalyst on the horizon

The group also announced the sale of its “beauty” division to L’Oréal for 4 billion euros, an operation which was appreciated by investors because it allowed the group to get out of debt. On Wednesday evening, Kering also delivered encouraging activity in the third quarter with sales above expectations, including at Gucci, the company’s most important brand. The title gained another 8.7%.

For HSBC, however, the stock is now likely to plateau, at least in the coming months. The bank lowered its advice on the stock to “hold” versus “buy” this Friday, even though it had gone the opposite way only a month and a half ago (on September 2 exactly).

On the Paris Stock Exchange, Kering shares fell 4.7%, showing the biggest drop in the CAC 40, this Friday, October 24.

HSBC highlighted in September that, in the world of consumer goods, externally recruited general managers tend to instill new dynamics and implement significant changes, boosting the share price in the process. The bank had in mind the recent examples of Bjorn Gulden at Adidas and Josh Schulman at Burberry.

HSBC’s investment thesis worked very quickly. So much so that the bank now thinks that the excitement must die down.

“Given the sharp rise in the share price in such a short time (+60% since the start of August, compared to +9% for the CAC 40), we think it is time to take a pause, as we see few positive catalysts materializing between now and the first speech from CEO Luca de Meo, which is likely to take place when the 2025 financial year results are published in mid-February,” HSBC writes.

In the meantime, the bank does not see the stock moving much in the next three months. The big meeting should take place next spring, when Luca de Meo will unveil his strategic plan for the company.

Last week, Berenberg lowered his advice to “sell” on Kering compared to “hold” previously.

“The optimistic scenario sees Kering as Burberry 2.0. A newly appointed and highly respected CEO, Luca de Meo, is expected by the market to unlock the latent value of the group’s iconic brands while resolving operating leverage and debt issues,” the bank wrote.

“However, in our view, the industry faces a demand problem, not a supply problem, in the form of aspiring and constrained Chinese consumers,” the German bank continued.

Kering’s significant exposure to aspirational customers (younger and less fortunate and therefore more sensitive to the economic situation than traditional customers) as well as to Chinese consumers “in hard times” will thus dampen the group’s sales recovery, Berenberg anticipated. This will penalize action and limit cost reductions, the bank concluded.