Valentino deal fails to lift Kering shares as Gucci woes mount
Reuters
Published Jul 28, 2023 09:54
PARIS (Reuters) - French luxury group Kering (LON:0IIH) is bulking up its fashion portfolio with the purchase of a 30% stake in Valentino but that will do little to reduce its dependence on weakening top brand Gucci, at least in the short term.
After stellar growth between 2015 and 2019, Gucci - which accounts for half of Kering's sales and almost two-thirds of its operating profit - has lagged rivals LVMH (EPA:LVMH) and Hermes, struggling to keep pace with their post-pandemic rebound.
Kering last week announced a major management reshuffle, including the exit of Gucci veteran CEO Marco Bizzarri, in a bid to revive sales at the brand. The group appointed managing director Jean-Francois Palus as interim Gucci CEO as it seeks a permanent replacement.
On Thursday, as the group posted lower-than-expected revenues for the second quarter, it also unveiled a surprise 1.7 billion euros ($1.9 billion) investment in Valentino, famous for its haute-couture and red-carpet designs.
Kering, is buying 30% of the Italian brand from Qatari investment fund Mayhoola and has an option to buy the rest in the next five years. The group also said it wanted to broaden its strategic partnership with Mayhoola, and that could lead to the fund taking a stake in Kering.
The M&A buzz failed to lift Kering shares on Friday, with the stock down 2.3% at 0824 GMT.
The stake in Valentino, which had 1.4 billion euros in sales in 2022 compared with Gucci's 10.5 billion euros, is "nice but long-term," said Exane-BNP Paribas analyst Antoine Belge.
"It is neither too small or too big, it is quite profitable but with room for improvement. However, Kering only taking a minority share means it does not move the needle short-term, notably in terms of lowering Kering's dependence on Gucci."
Centerview advised Kering on the deal, while Valentino said Rothschild and Intesa Sanpaolo (BIT:ISP) advised Mayhoola.
($1 = 0.9119 euros)
Get The App
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.