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Investing.com -- Bernstein downgraded Kering to Underperform from Market Perform, saying the stock “could run out of positive new news for a while” after a strong rally and a series of management changes under new CEO Luca De Meo.
The brokerage kept its price target at €240.
Analyst Luca Solca said De Meo “has hit the ground running” by delaying the Valentino deal, scrapping the co-CEO structure, and naming Francesca Bellettini to lead Gucci.
He also praised the “U-turn on in-house beauty” as a “great idea”, but noted that share price excitement looks excessive given that Gucci’s latest sales beat was marginal and the “jury is still out on how Demna could work out for the core brand.”
Kering shares slid 3% on Thursday, but remain up more than 32% year-to-date.
Solca said the downgrade “is not a no-confidence vote on new management” but a reflection that “stock market moves are a lot faster than business moves,” adding that valuations now leave investors “largely exposed to the hardest stretch of a brand turnaround.”
The analyst said further upside will depend on brand-level execution and a revival in Chinese luxury demand, where signals remain mixed. Over the summer, Bernstein noted a “significant Chinese stock market revival, higher traffic in store, revived high-end consumer confidence, and early signs of a real estate market finding a bottom.”
However, high saving rates and weak job prospects have led to a slump in middle-class confidence, with “saving money while enjoying life – like spending the night in your car while being a tourist – trending among young Chinese," Solca wrote.
Western consumers are also adjusting after the post-pandemic luxury boom, when brands like Hermès, LVMH, and Richemont doubled sales between 2019 and 2023. Solca said inflation and high interest rates have since curbed spending, though western demand now appears to be “returning to trend,” which could help support fiscal 2026.
Kering stock trades at about 27.8 times forward EV/EBIT, nearly double its 10-year average, implying the company would need to grow sales by 20% over the next two years to justify current levels. Consensus forecasts assume 12% growth.
Even with potential one-offs like divesting McQueen and Brioni, Bernstein said its fiscal 2026 EBIT margin forecast of 14.9% remains well below what current valuations imply.
“We think it is prudent to take profit from Kering at this stage,” Solca said, after a strong run for so-called self-help stories in the luxury space such as Kering and Burberry.
The firm now prefers quality names like LVMH, which it sees as offering a more credible recovery. A faster-than-expected Gucci turnaround or a broad rebound across brands like Saint Laurent, Bottega Veneta, and Balenciaga would pose the main upside risk to its view.