J.P. Morgan maintains Underweight on Kering, with a €235 target price
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J.P. Morgan maintains Underweight on Kering, with a €235 target price
The report expects Kering's Q2 sales to turn positive at +2% on a constant-currency basis, but Gucci's recovery remains slow and volatile, with limited near-term catalysts for a meaningful improvement in the share-price narrative.
- Group Q2 sales are expected to grow +2% on a constant-currency basis, with reported sales unchanged at €3,626m, broadly in line with Bloomberg consensus.
- H1 adjusted EBIT is expected to grow +1% year over year to €928m, with adjusted EBIT margin expanding 50bps to 12.9%.
- Gucci retail is expected to be -5% in Q2, improving from -9% in Q1, but Asia-Pacific and Gucci remain the main drags.
- 2026E/2027E revenue, adjusted EPS, and adjusted EBIT forecasts are raised only slightly, leaving estimates broadly unchanged.
Report interpretation
Overview
This report is J.P. Morgan's preview ahead of Kering's first-half 2026 results, incorporating modest adjustments to earnings forecasts based on recent industry data, foreign-exchange changes, and investor-relations communications. The report believes Kering's profitability should benefit from efficiency measures and improved execution by the new management team, but that revenue recovery will be gradual and uneven, particularly as Gucci's brand momentum has yet to show a clear positive inflection point.
Core views
The core view is to remain cautious: Q2 sales may improve from Q1's weakness, with group constant-currency sales expected to turn positive, but this performance is largely reflected in market expectations and is unlikely to materially change the share-price narrative in the near term. Fashion & Leather Goods and Gucci retail both show signs of sequential improvement, although traffic remains soft and Asia-Pacific continues to weigh on Gucci. The report maintains Underweight on Kering, citing significant execution risks in Gucci's transformation.
Analysis framework
The analysis is primarily based on the earnings preview, segment sales forecasts, margin improvement, foreign-exchange effects, comparison with market consensus, and a DCF valuation framework. The report focuses on Gucci, Fashion & Leather Goods, regional sales trends, and the contribution of efficiency measures to H1 margins.
Methodology notes
Discounted cash flow valuation
The Dec-27 target price is based on explicit forecasts for 2026-2030, a 5% mid-term growth rate, a 3.5% perpetual growth rate, and a 10% WACC.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Kering / PRTP.PACovered security
- Strengths
- Owns luxury brands including Gucci, BV, YSL, and Balenciaga; efficiency measures are beginning to partially offset the operating deleveraging pressure caused by weak revenue.
- Weaknesses
- Gucci has experienced fashion fatigue and underperformed the sector in recent years; evidence of improved brand momentum remains insufficient, and the pace of revenue recovery may be slow.
- Comparison
- The report believes Q2 sales and H1 EBIT forecasts are broadly in line with Bloomberg consensus, leaving limited room for near-term upside surprises.
- Risks
- Gucci execution risk, weak Asia-Pacific demand, pressure from tourist spending, foreign-exchange volatility, and transformation progress falling short of expectations.
Key data
- RatingUnderweightThe report maintains its Underweight rating.
- Target price€235.00The target price corresponds to Dec-27.
- Current price€265.65Price date: 29 Jun 2026.
- Group Q2 sales forecast€3,626mReported sales are unchanged, with +2% constant-currency growth.
- H1 adjusted EBIT forecast€928m+1% year over year, with a 12.9% adjusted EBIT margin.
- 2026E revenue€14,581mUp 0.3% from the previous forecast.
- 2027E revenue€15,481mUp 0.3% from the previous forecast.
- 2026E adjusted EPS€6.33Up 0.1% from the previous forecast.
- 2027E adjusted EPS€9.46Up 0.4% from the previous forecast.
Impact & implications
The report is cautious on the share-price implications: as Q2/H1 forecasts are broadly in line with market expectations, near-term changes in the positive or negative share-price narrative may be limited. Profitability could be supported if efficiency measures drive margin improvement; however, if Gucci's recovery is slower than expected, revenue and valuation recovery will remain under pressure.
Risks
- Gucci brand momentum recovers more slowly than expected.
- Insufficient revenue reacceleration leads to continued operating deleveraging pressure.
- Asia-Pacific and Gucci sales continue to weigh on overall performance.
- Foreign-exchange volatility may affect reported revenue and earnings.
- Store closures, new creative direction, and product transitions may continue to weigh on performance in the near term.
What to watch
- H1 results release on July 28, 2026.
- Whether Gucci retail sales continue to improve from -9% in Q1.
- Divergence in Fashion & Leather Goods retail across Western Europe, Japan, North America, and Asia-Pacific.
- Whether efficiency measures can continue to drive EBIT margin expansion.
- Whether new products arriving in stores, Demna's creative direction, and exposure during Milan Fashion Week can generate an inflection point in brand momentum.