The Kering share price has imploded in the past few years as its sales growth waned in key markets, especially in China. It stock trades at €175, down from the 2021 high of €723. This decline has led to a substantial decline in market cap, which fell from €98.9 billion to €22 billion, or a €76 billion wipeout.
Gucci sales continue plunging
Luxury goods sales have declined in recent years as the wealthy have scaled back their purchases. This slowdown occurred in most countries, particularly in China, a nation that has historically produced numerous millionaires and billionaires.
Customers have also had to deal with a volatile stock and crypto market and high interest rates in key countries. In China, many of them dealt with the collapse of the real estate market that wiped out trillions in value.
Most luxury goods companies have experienced decline during this period. For example, Aston Martin Lagonda, the manufacturer of high-performance vehicles, has had to raise cash several times to keep its lights on.
Burberry, the biggest luxury brand in the UK, has also come under so much pressure such that its stock has lost over 70% of its value in the past few years.
Kering, the parent company of Gucci, Yves Saint Laurent, Bottega Veneta, Balenciaga, Brioni, Creed, and Alexander McQueen, has been one of the most affected luxury goods companies.
Its woes are primarily because of Gucci, its biggest moneymaker that accounts for about 50% of its total sales. Its performance has contracted in the past few years, leading to several profit warnings.
Kering sales have plunged
Financial results released this week showed that the company’s first-quarter sales continued to worsen.
Kering made €3.9 billion in Q1, down by 14% from the same period a year earlier. This decline occurred as its Asia-Pacific region declined by 25%, and those in Western Europe, North America, and Japan experienced double-digit declines. That is a sign that the company’s business is deteriorating across all regions.
Most importantly, Gucci has become its worst-performing brand in its portfolio. Gucci sales dropped by 24% to €1.57 billion. Its other houses business also deteriorated, with its sales falling by 11% to €733 million.
The growth of Yves Saint Laurent, Bottega Veneta, and Eyewear businesses was not enough to offset Gucci’s plunge.
Kering hopes that Demna Gvasalia to be Gucci’s artistic director, who replaced Sabato De Sarno. Demna will become the artistic director in July of this year and will come from Balenciaga, a company owned by Kering.
Gucci’s sales have plunged because of the weak demand in China and the slow shift towards quit luxury. Analysts note that increased marketing by Kering diluted its brand in the past few years. At the same time, it has had leadership changes that have affected its brand.
History shows that some creative directors can help to boost sales. However, pegging a recovery to one person can be risky. For example, Daniel Lee, a well-known creative director who moved to Burberry, has failed to boost sales.
Kering share price technical analysis
KER stock chart | Source: TradingView
The weekly chart shows that the Kering stock price has declined significantly over the past few years. This sell-off has continued after each of its financial results has been worse than expected.
The stock dropped below the key support at €206.55, its lowest level on November 18 last year. It has remained below all moving averages. Specifically, the 50-week moving average has provided support.
The Relative Strength Index has tilted downwards. Therefore, the stock will likely continue falling as sellers target the key support at €150, which is about 15% below the current level.
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