'Hope rally continues': Gucci owner's shares soar 11% after report

Shares in Gucci owner Kering soared 11% to a one-year high after reporting better-than-expected revenue and earnings. Sales fell just 5%, a marked improvement over a disappointing second quarter, and could signal the possible start of a recovery. Analysts called the report "an encouraging step toward stabilizing the business," though some say they are in no rush to participate in the FOMO rally for fear of missing out on an opportunity.

Shares of the owner of Gucci - the company Kering - rose by 11% during trading on the stock exchange in Paris: their price reached € 352.45 - the highest level for the year. Quotes jumped after the publication of a report on a smaller than expected drop in sales and profits above forecasts, writes Reuters.

The French luxury giant, whose portfolio includes the Gucci, Saint Laurent and Balenciaga brands, reported revenue of €3.42 billion ($3.97 billion) for the third quarter. In comparable terms, sales were 5% lower than they were in the same period last year, but significantly better than the second quarter's results, when they fell 15%.

Comparable sales of Gucci, the group's biggest brand, fell 14% year-on-year (to €1.34 billion), but improved performance from a number of smaller brands helped partially offset the losses. Kering said Gucci's sales, although down, were still a marked improvement from the second quarter, when they were down 25%, CNBC reported. According to FactSet's consensus forecast, Kering's total revenue was expected to be €3.31 billion, while Gucci sales were expected to be around €1.32 billion (i.e. almost half of the group's revenue).

"Third quarter results, despite clear sequential improvement, remain well below market levels. This only strengthens my determination to work across all business lines to bring our Maison and Group back to the position it deserves," said Kering CEO Luca de Maio, as quoted in a company statement.

Since the beginning of the year, Kering shares are up about 47% amid a revival of investor hopes for a recovery in the luxury sector.

Deutsche Bank raised its target price for Kering shares by 3.4% to €300 on Oct. 23, however, below the current price. "Importantly, sales improvement is seen across all major brands. With margins and operating costs remaining stable, this has a positive impact on EBIT (earnings before interest and taxes. - Oninvest) forecasts," said Deutsche Bank analyst Adam Cochrane as quoted by CNBC. Gucci's improved performance, according to Deutsche, was driven by its revamped leather goods lines - primarily handbags - which should support sales in time for the launch of Demna Gvasalia's first collection in the first half of 2026.

Citi analysts highlighted the "notable absence of earnings forecast downgrades for the first time in more than three years" but said they "will not chase" this rally, driven by the FOMO (fear of missing an opportunity) effect, until the release of annual results and the company's new strategic program expected early next year, Reuters writes.

Investors are betting on "deep organizational and strategic changes" under de Meo's leadership, according to Citi analyst Tom Chauvet. "The hope rally is likely to continue," he noted (quoted in the Wall Street Journal).

Analysts at UBS added that Kering's report confirms "the overall improvement in the sector and the initial success of the measures taken by management to recover the business". "However, as Kering's story is largely tied to the relaunch of Gucci, skeptics might argue that Gucci is improving at roughly the same pace as the rest of the group's brands, and there is as yet no convincing evidence that Gucci's momentum is outpacing Kering as a whole," UBS said.

The better-than-expected results, analysts said, give reason for cautious optimism about the company's future. "We believe this is an encouraging first step toward revenue stabilization, especially for the Gucci brand," wrote Piral Dadhania and Richard Chamberlain of RBC Capital Markets.

Earlier this week, Kering announced an agreement to sell its Kering Beauty division to L'Oréal for $4.7 billion - as part of de Meo's strategy to reduce debt and focus on its core fashion business. It was a major step toward reducing Kering's net debt and also De Meo's first strategic move. Analysts had said that divesting Kering Beauté was a necessity for Kering as part of its reorganization.

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