Citi Sees Gucci Troubles Persisting Into Year-End

what happened

Citi analysts, as reported by Market Talk, believe Gucci will keep dragging on results at its parent Kering through the end of the year. The trigger was weaker group revenue in the third quarter, when the luxury house's largest brand underperformed.

The bank expects Gucci sales to keep falling in the final months of the year, citing macroeconomic pressure and slow foot traffic in stores. By Citi's estimates, Kering revenue will be flat year on year in the fourth quarter and flat for the full year. The bank has also lowered its earlier growth forecasts.

Citi expects softer sales, combined with cost pressures, to weigh on group earnings. It cut its target price on the Paris-listed shares to 201 euros from 243 euros. The stock closed Tuesday at 179.50 euros, down roughly 40% so far this year.

why it matters

For markets, this signals that the troubles at Kering's biggest brand could last and hit profits across the whole group. For investors in the European luxury sector, Gucci's sales trend remains the key driver of Kering's overall performance.

market impact

Kering: weak Gucci sales and rising costs pressure group earnings and the share price

• ▼Kering shares pressure down — weaker Gucci revenue and cost pressures threaten group earnings

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