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Investing.com -- Kering’s recent share price surge has stirred debate about whether the luxury group is on the road to recovery or simply repeating past stop-start patterns.
Bernstein analysts argue that self-help stories in luxury “rarely rebound in a regular upward trajectory, but rather through many significant up and down swings,” noting that Prada, Burberry, Ferragamo and Tod’s have all gone through such cycles over the past decade.
Kering stock has already rallied about 50% from recent troughs, despite little evidence of business improvement. The market has been buoyed by the appointment of Luca De Meo as group chief executive and the decision to bring in Demna Gvasalia as Gucci’s creative director.
Yet, Bernstein analysts believe that this is still an “I hope” trade, with investors betting on De Meo to strengthen the balance sheet and management bench, and on Gvasalia to reinvigorate Gucci.
Analysts see reasons for cautious optimism. De Meo, who previously led turnarounds at Renault and Fiat, is expected to have the latitude to rein in ambitious capex and M&A, continue asset disposals, and potentially pursue a high-profile beauty license rather than costly in-house development.
“Improving the executive team doesn’t seem an impossible task, given the low starting point. And over the top Demna seems on paper a better fit for Gucci than demure Sabato,” the analysts led by Luca Solca said.
Still, the team argues that valuation looks stretched. The stock trades around €260 against a target of €180, with consensus estimates pointing to continued double-digit organic sales declines in the second half of 2025.
Bernstein expects that these declines are likely to prompt downward revisions for both fiscal 2025 (FY25) and FY26.
Sector trends also suggest a near-term pullback. Luxury shares have already bounced 7% from August lows as “fast money” played easier third-quarter comparisons and a firmer Chinese consumer, but tougher comps in the fourth quarter loom.
Upside risk could come if De Meo acts decisively and successfully, but analysts caution that moving too quickly may backfire. “If he acted too quickly on Gucci and things didn’t work out, he could be seen as contributing to the problem. Why risk that?” analysts asked.
They added that, coming from a different sector, De Meo "has the perfect excuse to wait and see."
Bernstein expects major announcements at a strategic update in spring 2026, though smaller steps could come before year-end. Recent moves, such as postponing the Valentino option, have had muted market reactions, suggesting balance-sheet repair is already priced in.
In Bernstein’s view, Kering sits at a fork in the road for luxury investors. If Chinese consumer sentiment improves, safer bets lie with quality names such as Hermès, Richemont, and LVMH.
On the other hand, if global demand weakens, idiosyncratic self-help stories may perform better, with Burberry most credible and Kering potentially joining that list if execution falls into place.