Kering's Earnings: Brands Sales Trends Remain Weak; Shares Undervalued

We are maintaining our fair value estimate of EUR 600 for narrow-moat Kering as the company reported somewhat improving revenue trends in the fourth quarter and margin pressure. Like peers, the fourth quarter benefited from an easier comparison base notably in Asia (fourth quarter of 2022 was impacted by lockdowns in China). Sales were down 4% at constant currencies (negative 9% in the third quarter) for the group and negative 4% for the Gucci brand. Kering group continues underperforming its big peers, such as LVMH and Richemont (9% growth for LVMH’s fashion & leather division and 8% for Richemont in the quarter). Still, we believe shares present value, as we don’t see current underperfomance as permanent.