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MarketScreener Homepage  >  Equities  >  Euronext Paris  >  L'Oréal    OR   FR0000120321

L'ORÉAL

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Kering shares slide as Gucci's growth slows

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04/18/2019 | 05:38am EDT
A Gucci sign is seen outside a shop in Paris

PARIS (Reuters) - Kering shares retreated sharply on Thursday after signs of slowing growth at the French luxury group's Gucci brand, particularly in the United States.

Analysts honed in on Gucci's performance as one of the main reasons for the share price drop, after Kering's first-quarter update released after Wednesday's market close showed U.S. growth cooling at Gucci, which accounts for some 60 percent of group sales.

The stock, which had hit a record on Tuesday ahead of the update, was down 3 percent by 0925 GMT, lagging rivals like Louis Vuitton owner LVMH or Italian luxury jacket maker Moncler, which also traded lower.

Gucci, with annual sales surpassing 8 billion euros ($9 billion), has outperformed most of its peers in the past two years thanks to a flamboyant revamp under designer Alessandro Michele.

That trend remained intact, with the brand posting first-quarter comparable sales growth of 20 percent, still higher than Vuitton and a touch above what some analysts had expected.

But investors had grown accustomed to Gucci beating forecasts by a wide margin, and its slowdown was partly due to a weaker performance in the United States. Leather goods specialist Bottega Veneta (BV) also disappointed.

Gucci's latest sales growth of 20 percent was less than 28 percent three months earlier, and down from nearly 50 percent at the start of 2018.

"There were two dark spots ... Gucci U.S. decelerated to 5 percent organic sales growth and Bottega Veneta was back down at minus 9 percent, down more than in previous quarters," JP Morgan said in a note.

Maybelline mascara maker L'Oreal on Tuesday also pointed to a surprisingly weaker U.S. backdrop.

U.S. PRESSURES

Asked about U.S. pressures, Kering CFO Jean-Marc Duplaix said on Wednesday the year-on-year comparison base there was very high, while the economic environment had softened a little.

But there was no "specific concern so far," Duplaix told analysts. Clients in North America tended to spend more on clothing and shoes than handbags, a category that is expected to grow faster this year, he added.

JP Morgan analysts noted a falling U.S. stock market at the end of last year could have fed through to consumer spending in the first quarter.

Duplaix did not quantify any impact from a outcry over a sweater Gucci quickly pulled from sale and apologised for after some consumers said it was racist. The black rollneck featured large red lips cut out around the mouth area.

Kering is still seen as one of the luxury industry's best performers, thanks to Gucci's strength in thriving markets like China and despite an overhaul at Bottega Veneta.

"Management said that growth for Gucci in March was in line with January-February combined, which we see as reassuring," RBC Capital Markets said. "Saint Laurent, Balenciaga and Alexander McQueen continue to shine, while BV's difficulties in a transition year are not enough to offset the positives."

(Additional reporting by Pascale Denis and Laetitia Volga; Editing by Alexander Smith and David Holmes)

By Sudip Kar-Gupta and Sarah White

Stocks mentioned in the article
ChangeLast1st jan.
KERING 1.36% 468.95 Real-time Quote.13.93%
L'ORÉAL 0.69% 249 Real-time Quote.23.76%
LVMH MOËT HENNESSY VUITTON SE 0.75% 370.05 Real-time Quote.43.32%
MONCLER S.P.A. 0.46% 32.62 End-of-day quote.12.24%
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Financials (EUR)
Sales 2019 29 447 M
EBIT 2019 5 471 M
Net income 2019 4 198 M
Finance 2019 3 387 M
Yield 2019 1,69%
P/E ratio 2019 32,8x
P/E ratio 2020 30,0x
EV / Sales2019 4,63x
EV / Sales2020 4,31x
Capitalization 140 B
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Mean consensus HOLD
Number of Analysts 29
Average target price 245,34  €
Last Close Price 249,00  €
Spread / Highest target 18,9%
Spread / Average Target -1,47%
Spread / Lowest Target -20,9%
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NameTitle
Jean-Paul Agon Chairman & Chief Executive Officer
Alexis Perakis-Valat President-Consumer Products Division
Barbara Lavernos Executive Vice President-Operations
Christian Mulliez Chief Financial Officer & EVP-Administration
Laurent Attal Executive Vice President-Research & Innovation
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