Kering is a French luxury Group, founded by businessman and millionaire François Pinault and with fashion brands such as Saint Laurent, Gucci and Bottega Veneta, among others. Its products range from leather goods, fashion, accessories, footwear, watches and jewelry, mainly from retail stores.
Kering’s sales in 3Q21 improved 12.2% on a like-for-like basis compared to 3Q20 and the momentum is + 10% compared to 3Q19. In 9M21, the accumulated impulse in sales is 36.6% compared to a year ago and + 9% compared to 9M19. The strong pull in the North American region stands out, a region that accounts for 28% of the total, while Western Europe (26% of the total) and Japan (which contributes 6% of total sales) with more modest sales recovery They are two markets still affected by the absence of tourists. In Asia-Pacific (the region that contributes the most, with 34% of sales), after a strong first half of 2021, already in the third quarter sales in this geographical area were affected by the increase in the incidence of COVID-19 with the Delta variant. Online sales continue to show strong growth, + 24.3% in 3Q21 vs. 3Q20 and + 147.9% compared to 3Q19.
By “houses”, Gucci with 488 physical stores, its main flagship, + 4.5% in quarterly sales vs 3Q20 and + 29.1% vs 3Q19; Yves Saint Lauren, with 261 physical stores, + 27.8% in 3Q21 vs 3Q20 and + 42.5% vs 3Q19; Bottega Vaneta, with 259 stores, + 9.3% compared to 3Q20 and + 28.2% compared to the third quarter of 2019.
It is precisely the slowdown in the pull of demand from China and the fall in sales in the Asian giant region that has been penalizing the figures for the luxury sector in recent months. And it is that the latest macro data arriving from China stoke fears about a possible slowdown in its economy, something that the sector has been collecting not only in its accounts, but also in its price. At the moment it seems that everything remains in a small growth correction, a small bump to adjust strengths and direct growth in China that continues to be structural and may adjust its strength from 2021 to 2022 but, in any case , it is not seen to be in danger.
Regarding forecasts for the Kering accounts at the end of 2021 and 2022, the market anticipates + 27.48% and + 10.8% in sales respectively, with an improvement in EBITDA of + 32.27% and + 13.22% for the current year and the next and a boost in net profit of + 59.74% for 2021 and + 15.87% for 2022. Not inconsiderable growth.
Always surrounded by recurring rumors about possible mergers and acquisitions. The company has even confirmed that it is looking for opportunities in this regard and the market is betting on an alliance with its Swiss rival Richemont. His shareholder remuneration is in cash and on account of 2020 Kering paid € 8 / share. The same amount on account is expected in 2021, with a yield on dividend-Yield of 1.11% at current prices.
Robust balance sheet with multiples of solvency at adequate levels that will facilitate carrying out investments without debt stress.
In a valuation by multiples and under average market forecast, Kering’s securities are not expensive. The market discounts a PER of 28.5v for Kering (PER 30v for LVMH), which adjusted by the estimated growth of EPS (+ 60.78%) places the PEG at levels of clear undervaluation (+ 0.47v) and collects the upside potential of the value. Also undervalued by PCF, 21.67v for Kering, compared to 26.5v for LVMH. With a robust balance sheet with a moderate debt that allows it to face investments, growth and an estimate of strong impulse in EBITDA and Sales, its ratios are fully justified.
Based on a fundamental assessment, the recommendation is positive for an investment in Kering in the medium / long term.
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