Kering Stock Analysis (PPRUY) – Gucci is not selling

Kering stock (PPRUY) fundamentals, overview

Kering (PPRUY) is a French luxury goods manufacturing and distribution group that started in 1963 as François Pinault's woodworking business and then became one of the world's leading luxury brand holding companies through acquisitions and transformations. The company is headquartered in Paris, employs more than 43000 people, and its portfolio includes iconic fashion houses such as Gucci, Yves Saint Laurent, Balenciaga, Bottega Veneta, Alexander McQueen and Brioni, as well as jewelry and eyewear businesses (Boucheron, Pomellato, Kering Eyewear). Since 2013, it has been called Kering, which refers to the word “caring”, indicating its sustainability and social responsibility efforts.

The company's direct competitors are the largest players in the global luxury industry: LVMH, Hermès and Richemont. In contrast, Kering focuses on premium fashion brands, creative direction, and product portfolio differentiation. Interestingly, around 80% of the company's clientele is women, and management is committed to increasing the proportion of female leaders, with 55% of its board members currently made up of women.

Market capitalization: EUR 28.9 billion
Investor relations: https://www.kering.com/en/finance/
iO Charts share subpage: KER.PA

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📒Table of Contents📒

I have created a table of contents to make it easier for you to navigate the longer articles:

• Kering (PPRUY) Specialties
• How does Kering (PPRUY) make money and what market advantages does it have?
• Kering (PPRUY) metrics
• Kering (PPRUY) acquisitions
• Kering (PPRUY) management
• Competitors: Kering (PPRUY) opponents
• What risks does Kering (PPRUY) face?
• Kering (PPRUY) valuation
• Major news and the last quarter
• Other interesting facts about Kering (PPRUY)

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〽️Market segment analysis〽️

In this section, I examine the dynamics of the market segment, how it operates, who the main players are, and what tailwinds or headwinds the players in the given market have to deal with. I will not analyze companies in depth, but I will touch on the market share of individual companies.

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The luxury market is a very specific segment that consists of several sub-segments. Luxury products can basically be classified into two large groups:

• 👜soft luxury products – constant, recurring consumption, but characterized by lower prices, therefore naturally fluctuates more:
  • 💄cosmetics: Estee Lauder, L'Oreal
  • 👔clothing and accessories: LVMH (MC), Richemont (CFR), Hermès (RMS), Kering (PPRUY)
  • 🍷alcohols: Some products from Diageo and Brown-Forman. We analyzed these: Diageo (DEO), Brown-Forman (BF-B)
• ⌚hard luxury products – less frequent purchases, but much higher value, less affected by inflationary pressure because people with very high income levels buy these:
  • 🚗car manufacturers: Ferrari, Lamborghini, Bugatti etc.
  • 💍jewelry: CARTIER
  • ⌚watch manufacturers: Rolex, Tag Heuer, Swiss watch trinity

In other words, when we talk about a clothing or sports car manufacturer, or perhaps a bag manufacturer, we have to look at the company completely differently if it is in the luxury industry. In this sense, even a premium manufacturer is closer to the average basic industry than its counterpart in the luxury segment of the same industry. A very good example of this is Porsche AG (P911), which is a car manufacturer between the premium and luxury levels, but is no longer able to provide the qualities expected of luxury products. You can read the analysis here: Porsche AG (P911) Stock Analysis – They're Not Pressing the Gas.

The luxury industry, unlike average consumer products, has the following characteristics:

• ☝🏼With the growing population, there are more and more consumers
• ☝🏼The proportion of the rich increases within the growing number of consumers (more wealth is created than is lost)
• ☝🏼the growing number of rich people wants to represent more and more to the other rich people (especially in authority-based societies like China), an endless growth trajectory
• ☝🏼the rich are not really affected by inflation, their consumption is not cyclical. This is especially true for the UHNWI, or ultra-high net worth individuals
• ☝🏼The luxury industry is built on traditions, and the generational change often passes on this attitude, as do luxury items (cars, bags, etc.). A great example of this is the Birkin bag, which is usually passed down from mother to daughter, but I could also mention vintage sports cars.
• ☝🏼There is a constant over-demand for luxury products (manufacturers keep supply artificially low, producing less than they could sell), a very good example of this is Ferrari, which could produce more than 13000 cars a year, but deliberately does not.
• ☝🏼this gives companies great pricing power (the premium of luxury is built into the product, it will be more expensive in itself because of the great power of the brand and this is coupled with scarcity)
• ☝🏼The list price of luxury items is almost always lower than the secondary market price (i.e., their price increases when they leave the store, unlike what happens with an average product, which decreases in price.) A very good example of this is the luxury watch market.
• ☝🏼The pricing of luxury brands is completely divorced from their real use value, here you have to pay for the desire to own and the prestige, not for the fact that it is an object of use
• ☝🏼Luxury items are also good as a type of investment, for example, the value of rare sports cars tends to increase

The market size was $259 billion five years ago, and is expected to grow to $382 billion this year. The next four years of growth could reach a CAGR of 5.4% per year and a market size of $419 billion, according to Statista. However, since this analysis was made in 2024, it is worth noting that continuous growth was expected, but this is not supported by the decline of Kering, LVMH and Richémont, as you will see later.

Some companies are expanding into other subsegments for portfolio diversification reasons, e.g. Gucci not only produces clothes and shoes, but also participates in the accessories market and sells cosmetics, while Hermès sells almost only luxury leather goods.

👌🏼Heritage, or the added value that can only be acquired over time, is very important for these companies, and it creates a barrier for new industry players and hinders market entry.

Although this is not necessarily true in the case of Kering (PPRUY), most companies have a 100-year history, everything is made by hand, the entire distribution network is under control, and each company is usually managed by a family. This is not true for conglomerates, which typically incorporate the right brands into their portfolios through acquisitions. Hostile acquisitions are quite common, with LVMH, and within that, the “wolf in cashmere,” Bernard Arnault, excelling.

Since Kering (PPRUY) is primarily an apparel manufacturer, the industry's sub-segments can also be classified according to which brand it falls into:

• 👗Luxury: most often conglomerates, no depreciation, excess inventory is destroyed (e.g. Burberry scandal), they control the entire supply chain, there is continuous over-demand for their products, production is in France or Italy. Older generation, 30+ buys, some products are passed down from generation to generation, they are mostly sold in physical stores, there are few listed products, there are no prices online.
  • Companies: LVMH, Richemont (Cartier), Hermès, Kering, Christian Dior SE (majority owned by LVMH)
  • Brands: LV, Salvatore Ferragamo, Dior, Prada, Chanel, Gucci, Bottega Veneta, Balenciaga (these three are Kering), Hermès, Giorgio Armani, etc.
• 👡Premium: half/third of the luxury pricing. Almost never discounted.
  • Companies: Moncler, Burberry (here the company itself is the brand)
  • Brands: Moncler, Burberry
• 👟Accessible: There is devaluation, outsourced production in underdeveloped countries, on-line orders. It is also called masstige or affordable luxury.
  • Companies: Nike, Adidas, Puma, VF Corp, etc.
  • Brands: Levi's, Nike, Adidas, Michael Kors, Coach, Ralph Lauren, Tommy Hilfiger, Calvin Klein (both of these are PVH Corp.) Lacoste, Guess, etc.
• 👕Fast fashion: They copy the products of luxury industry players in low quality. Generation Z buys and mixes it with luxury, e.g. Hermès bag with a Zara dress;.
  • Companies: H&M, Zara, etc.

The above is very important because the Top ten players in the entire industry collected 56+% of the revenue and 76.4% of the profit three years ago, unfortunately I could not find a more recent study. From a value creation perspective, it is worth buying almost exclusively luxury industry players, because their capital yields the highest profit. This is true not only for the clothing industry, but also for car manufacturing; it is no coincidence that Ferrari (RACE) earns the most on its cars.

The COVID pandemic has shown how strong luxury brands are. The overall revenue drop in the fashion industry was 70%, compared to which LVMH raised prices by +8%, Chanel by +10%, Hermès by +6%, and by the end of the pandemic, Chanel had raised prices four times! in two yearsIt is clear that they have much greater retention power (8-10% annual price increase, plus 3-4% growth at fair value) than other competitors. What is the reason for this:

• ☝🏼luxury products are purchased by high-income individuals who are not really exposed to inflation
• ☝🏼Price increases are not necessarily a disadvantage, they are status symbols
• ☝🏼There is constant over-demand, so satisfying the pleasure of buying is the main driving force
• ☝🏼For them, price increases are almost irrelevant

At this point, it is worth defining the three categories we are talking about:

• 🪙HNWI: an individual with a net worth of $1 million, excluding their own residential real estate. This is where private banks and wealth managers typically start providing targeted services in the US. These people are very rarely employees, but if they are, they are typically senior managers.
• 👛VHNWI: This category is above HNWI. It includes those with a net worth of between $5 million and $30 million. This is an intermediate level between “regular” HNWI and the ultra category. These people are practically no longer working, are company directors or private individuals who live off their investments.
• 💰UHNWI: refers to the wealthiest individuals in wealth management terminology. They are those with a net worth of over $30 million, not including their own residential property. This group makes up less than 0.1% of the global population, yet they account for a disproportionate share of the luxury market, particularly hard luxury, i.e. buyers of watches, jewelry, handbags, and sports cars, and the super-premium segment. Naturally, these people are not working in the traditional sense of the word either.

The above implies a healthy growth rate of 10-12% per year, which is what the market can handle as long as there is no economic crisis. Plus, the underpricing of the shares also adds to this value, which usually yields quite a good total return potential. In other words, when a brand grows very quickly, it “runs ahead” in its own growth, and then a decline usually follows, the market almost catches up. This happened, for example, with Gucci, which grew 70% year-on-year for three years, which is unrealistically high growth, but I could also mention the luxury watch segment.

💡Discounting is prohibited in the luxury segment, so inventory is usually destroyed. or excess stocks are imported illegallyThis is generally not viewed favorably by the public, such was the Burberry scandal..

It is important to note that although product destruction is not an illegal practice, in today's conscious world, it is generally viewed with great disdain by consumers and erodes the strength of the company's brand. Therefore, companies either hide these facts or do not use this practice. Due to the above, a kind of secondary market and websites like Farfetch have emerged. This practice is not viewed favorably by all luxury manufacturers; for example, Kering does not even work with them.

Dior has stated that if too much of something is sold, it should be discontinued. The question is how much pressure the emergence of aftermarket companies will put on luxury companies. There's a good chance it's not a big deal, as the main thing for the rich is to buy the product from the original manufacturer, because on the one hand they don't want to take the risk of buying a fake product, and on the other hand the prestige of the purchase is much greater.

Most people associate the luxury industry with clothes, but for example, Gucci, a company that belongs to the conglomerate (PPRUY), clothes account for only 10% of its revenue. Leather goods bring in much more money, 40% for Gucci, 45% for Prada, 75% for LVMH, and 50% for Hermès, with icons like the Birkin and Kelly models.

☝🏼These products are surrounded by a milieu like Rolls-Royces or Ferraris, there is even a 1-year waiting list for them and only those who deserve it can get them, not just anyone can go in and buy these products. 

This can be compared to luxury watches, and these bags do not break down for decades, they are in excess demand, so they change hands at higher prices on the secondary market. They can only be purchased in person in stores in prominent locations. Design is organized around a particular genius who designs these things, which is also the risk. What happens if he dies, steps down, starts his own brand, like Tom Ford, who ran the Gucci brand? Karl Lagerfeld is a good example of this, he was the head of Chanel for 4 decades.

💍What gives luxury brands their power?

According to industry players, if you want to examine the strength of a luxury brand, you need to consider 4 key factors:

• 💶pricing power: determines how much a company can raise the price of its products or services without causing a decline in demand. Hermès has one of the best pricing power in the luxury industry; their extremely high-quality leather products are price inelastic, meaning that consumption does not fall even if the price is increased.
• 👀appearance through consumption: A concept derived from economist Thorstein Veblen, which refers to when the purpose of a purchase is not only to satisfy needs, but also to demonstrate social status. Luxury brands typically build on this: owning a product is also a signal to the environment about the buyer's financial situation and social position.
• 💎investment value stability: It shows the value-preserving nature of the brand's products, that is, the value that the object represents beyond its intrinsic value. For example, some hard luxury products, such as luxury watches, sell for much more than their list price, in many cases from official sources. After they are purchased, their prices increase further due to their rarity and exclusivity, such as the Swiss watch trinity, Patek Philippe, Audemars Piguet and Vacheron Constantin, the latter owned by the Richemont Group.
• ⛓️control over the distribution chain: how much a given manufacturer can interfere in the sourcing of raw materials, the manufacturing process, transportation, and distribution of products. For example, Kering (PPRUY) owns Gucci's entire distribution chain, excluding listed products, which account for ~15% of the brand's revenue.

👗What is the Chanel Pyramid?

In the luxury industry, this term has been used to describe the strategy of the Chanel fashion house: at the top of the pyramid is haute couture, the most exclusive category in the fashion world, offered to a very narrow circle, with high prestige. Below it are ready-to-wear and accessories, and the broadest base is cosmetics and perfumes. This name comes from the literature and industry analyses that wanted to visually present Chanel's business model. For example, at the top of the Chanel pyramid is a $100000 bag or suit, below it is a wider range of smaller accessories, and so on.

👜What is haute couture?

Haute couture is a French term that literally means “high tailoring.” It is the most exclusive category in the fashion world, which only a few Parisian fashion houses are allowed to use with the permission of the Chambre Syndicale de la Haute Couture (the French Haute Couture Association). The conditions are extremely strict, for example:

• 👌🏼Every garment must be made by hand, custom-made,
• 🪙for individual customers, over hundreds of working hours,
• 🏚️a certain number of artisan tailors and seamstresses must work in the workshop,
• 👚It is mandatory to present two collections per year (spring/summer and autumn/winter).

Haute couture pieces are not made primarily for revenue, but for prestige and creative leadership: they showcase the craftsmanship and creativity of the fashion house, which then benefits the ready-to-wear (pret-à-porter) and accessory lines.

• 👉 Example: Chanel, Dior, Givenchy, Valentino haute couture collections.

☝🏼From the above, it can be seen that brands and iconic products are surrounded by a kind of legend, which has to be paid for separately, the function is often secondary. The point is ownership, who owns the given product, and that only very few people can buy the same one, this is worth a lot of money in this market.

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🙋‍♂️Kering (PPRUY) specialties🙋‍♂️

In this section, I examine what specialties the analyzed company has, what its position is in the market, and whether it does anything differently than its competitors. If so, what and how, and what impact does this have on their operations.

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The Gucci brand accounts for half of Kering's (PPRUY) revenues and two-thirds of its profits. The history of Gucci dates back to the 1980s, best understood from the film The House of Gucci. In the context of a family feud, Maurizio Gucci clashed with his uncle and his sons, Aldo and Paolo, and forced the sale of nearly 50% of the company, which was bought by a Bahraini investment group, Investcorp, the owner of the Tiffany brand. Maurizio Gucci remained the owner of the other 50%, but he almost bankrupted the company, at which point Investcorp bought the other 50%. Maurizio Gucci was murdered in 1995 by his ex-wife, Patrizia Reggiani.

In 1989, Dawn Mello was hired to turn the company around, hiring the legendary Tom Ford as creative director at Gucci, who turned the company around, then later founded her own label and sold it for $3 billion. She reduced the number of stores and products, and came up with all sorts of unconventional and zeitgeist-inducing clothing, such as the G-String. In 1995, they took the company public on the New York Stock Exchange and used the capital to buy themselves out of Investcorp for about $1.9 billion.

As the company became a publicly traded company, Bernard Arnault, CEO of LVMH, attempted to gain control of Gucci through hostile takeovers, acquiring a 34% stake through various shell companies. This was also the case with Hermès, but the takeover of the company failed there as well. At that time, Gucci Group NV, Tom Ford and the company's lawyer, Domenico De Sole, turned to French financier Francois Pinault and PPR, now Kering, for help, who bought 40% of the company and reduced LVMH's stake to 20.7% through share dilution. As part of the deal, the Yves Saint Laurent and Sanofi brands were also owned by PPR, and then back to the Gucci Group. A kind of cold war has developed between LVMH and Gucci. The parties finally reached an agreement in 2003, as part of which Domenico De Sole and Tom Ford left Gucci-PPR.

The company has entered another deep dive, from which one thing is clear: The creative designer and director plays a key role in luxury brands, as they shape the image of luxury companies. The decline and falling sales in 2015 were blamed on creative director Alessandro Michele His appointment and work stopped him. Alessandro came up with a lot of new things, and it is thanks to him that the company's product sales soared between 2015 and 2022. They opened up to the Chinese market, created a Gucci store on Tmall, and introduced a lot of innovations, new materials, e.g. leather goods, metals. Alessandro Michele left in January 2023 and was replaced as creative director by Sabato De Sarno, who previously worked at Prada, Dolce & Gabbana, and Valentino. The piquancy of the latter is that Kering (PPRUY) acquired a 30% stake in the Valentino brand two years ago. 

However, Sabato se Sarno's work did not last long, he left Gucci in February 2025, his successor was Demna Gvasalia, or Demna as he is called. He came in-house, as he was previously the creative director of Balenciaga, and the management now expects him to bring a new lease of life.

Several things follow from the above:

• 🤔Kering is not really diversified despite its many brands, the majority of revenue and profit comes from Gucci, so essentially Kering=Gucci. This is not so uncommon in other industries, for example, Brown-Forman (BF-B) depends on Jack Daniels, while Merck & Co (MRK) essentially depends on Keytruda sales. I also analyzed these companies:
  • (I.e.Brown-Forman Stock Analysis (BF.B, BF-B) – Another Round?
  • ????Merck & Co. (MRK) Stock Analysis – Heads or Tails?
• 🧠the personality and work of the creative director are key issues, If there is no big brain behind the company, the company can go through quite big crises. There is a kind of creative cyclicality in their operations. In 2016, before Tom Ford, the share price was 16 USD, in March 2021 it was 91 USD, in August 2025 ~25 USD.

Kering (PPRUY) is a conglomerate company, practically created by acquiring other companies. The biggest advantage of such a structure is that there are many more resources available, the market size is larger, and money can be easily reallocated. The individual brands are called houses, each with its own management, but they also answer to the leaders of the conglomerate. Kering only and exclusively brings together luxury brands and products, with the only exception being the Puma fiasco in 2007, which did not fit into the company's portfolio.

Kering (PPRUY)'s brands are as follows, based on the book The Curious Economics of Luxury Fashion: Millennials, Influencers and a Pandemic, which I recommend reading to anyone interested in the luxury industry:

• 👗Kering (PPRUY) luxury brands: Gucci, Bottega Veneta, Balenciaga
• 👠Other brands: Yves Saint Laurent, Alexander McQueen, Brioni, Boucheron (jewelry, bracelets), Pomellato, DoDo, Qeelin (jewelry), Ginori (ceramics), Kering Eyewear (glasses), Kering Beuté (cosmetics)
• 🥋New, acquired brands: Valentino (fashion brand), Creed (perfume). Maui Jim (sunglasses), plus more eyewear brands such as Visard, Mistral and Lenti in 2025.

Kering actually plays in the luxury leather goods, clothing and accessories market. The segment is quite concentrated, with its biggest competitors being:

• 👜leather industry: LVMH, Hermès, Richemont
• 💍jewelry: CARTIER
• 👃🏼perfumes: Chanel
• ⌚watches: Rolex, plus some private watchmakers

and indirectly, luxury cosmetics manufacturers Estée Lauder and L'Oreal. The company is fundamentally linked to the Pinault family – Pinault-Printemps-Redoute, the company was renamed Kering in 2013. The company is managed by CEO Francois-Henri Pinault. Kering can trace its origins back to 1963, but some of its brands, such as Gucci, were founded in 1953.

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💰How does Kering (PPRUY) make money and what market advantages does it have?💰

In this section, we examine what exactly the company does to generate revenue, what products and services it has, how indispensable they are. Does it have any competitive advantage (economic moat), how defensible is it, and whether the trend is decreasing or increasing, and what is likely to happen in the long term.

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Kering (PPRUY) is a holding company. This means that although the revenue flows into one place on the financial side, the brands were able to maintain their independence. They have their own management, essentially operating as a company within a company, with their own CEO, creative director, and product range. This model is not unique at all, LVMH follows a very similar business structure. Such companies place the operations themselves within a unified framework, but the creative autonomy remains with the brands.

Kering (PPRUY) is a vertically and horizontally integrated company. To understand the significance of this, we first need to clarify these two concepts:

🌟Vertical integration

• The company is present at several levels of the value chain.
• For example: a luxury brand, Kering or LVMH, not only owns the design and retail part, but also has its own manufacturing plants, suppliers, e.g. leather processing, eyeglass lens production, perfume factory.
• Goal: supply chain control, better quality assurance, higher margins, less exposure to external suppliers.

☀️Horizontal integration

• The company is expanding at the same level in the industry, bringing together several companies with similar profiles.
• For example, Kering owns various fashion houses, such as Gucci, YSL, Balenciaga, Alexander McQueen, but such is the EyeWear division, which mainly includes glasses, lenses and their accessories.
• Goal: increase market share, economies of scale, stronger negotiating position, wider range of offerings for consumers.

👉 To summarize the above:

• Vertical = build up and down the value chain: raw material → production → sales.
• Horizontal = broaden the portfolio at the same level: more brands, more stores, larger market in the same subsegment.

Kering's (PPRUY) acquisition policy has clearly shifted towards vertical integration in recent years, see more: Kering (PPRUY) acquisitions. The company acquired the following brands in the eyewear segment: Maui Jim, Visard, Lenti, Lindberg, UNT. It also acquired the manufacturing and supply capacities, so that not only design and sales remain in-house, but also key points in the supply chain. This allows for higher margins, tighter quality control and reduced dependence on external partners. A similar trend can be observed in the beauty business, where Kering became not only a brand owner but also a de facto manufacturer through the acquisition of Creed.

At the same time, the group has not given up on horizontal integration: a good example of this is the acquisition of a 30% stake in Valentino, which provides an option for full acquisition by 2028. This move serves to broaden the fashion house portfolio, thus expanding its market presence horizontally. Overall, Kering's (PPRUY) strategy is twofold: it strengthens its industrial background and supply chain through vertical integration, while further expanding the range of luxury brands through horizontal acquisitions to remain competitive alongside LVMH and Richemont.

To give an example outside the industry, the above vertical integration was brilliantly implemented by the Polish company Dino Polska (DNP). This is a retail chain, but it has its own meat plant, trucks for transportation, solar panels for energy production, they produce their own branded products, they have registered the Dino Oil name for gas stations, and they have even supplemented their activities with a pharmacy chain. In fact, they have even purchased the land under their stores, making them almost independent of any external circumstances. You can find their analysis here: Dino Polska SA Stock Analysis (WSE: DNP; ADR: DNOPY).

65% of Gucci's sales are made by Generation Y, meaning millennials and younger, which is very surprising to me, for example, their sneakers, some models cost 7-800 USD, are extremely successful. There are ~500 Gucci boutiques in the world, but of course the other brands have their own stores as well. The revenue is distributed very unevenly between the company's brands, Gucci was their main name for years, but their smaller brands like Yves Saint Laurent or Bottega Veneta also brought in decent revenue, as you will see in the next chapter.

It is also worth knowing the age distribution of customers. In the US, the average age of those buying Kering (PPRUY) products is 47-52, while in China it is only 37 years old, meaning more young nouveau riche are buying in the Far East than in the US or EU. This, in turn, forces luxury industry players to adapt, especially in China, which is an authoritarian society, e.g. a driver with white gloves delivers the luxury bag and hands it over in front of the neighbors. In other words, they need the spectacular decoration with which they can represent themselves to the neighbors.

🏢Kering (PPRUY) holding company: Artemis

Artemis SA is the holding company above Kering (PPRUY), founded by François Pinault in 1992. This holding company belongs to the Pinault family and is also the majority owner of Kering:

• Founder: Francois Pinault (1992)
• Owners: the Pinault family (François Pinault and his children, primarily François-Henri Pinault, Chairman and CEO of Kering)
• Post address Paris, France
• Circulating share: approximately 41–42% of the shares, making it the largest, controlling owner.

🖼️Artemis' other interests

Artemis' portfolio is broad, and it doesn't just include Kering (PPRUY):

• 🎨 Christie’s: one of the largest art auction houses in the world (owned by the Pinault family since 1998).
• 🍷 Vineyards & Wineries: significant wineries in Bordeaux and Burgundy (e.g. Château Latour, Domaine d'Eugénie, Clos de Tart, Eisele Vineyard in California).
• 🏦 Artemis Finance Group: financial investments, private equity fund.
• ⚽ Stade Rennais FC: French first division football club (since 1998).
• 📚 Edit: owned by a book publisher for a while, later sold to Artemis.
• 🌍 Other investments in startups, real estate, technology companies

💼The significance of Artemis in relation to Kering (PPRUY)

Artemis provides Kering with its strategic backstop:

• provides family control and long-term direction,
• provides a stable financial foundation with its diversified portfolio,
• It also strengthens the cultural and social influence of the Pinault family (e.g. art foundations, Fondation Pinault).

📌Note: In addition to the above, I think an important idea that every Kering (PPRUY) owner should know is that since Artemis owns about 42% of the shares, they are setting aside their share of the more than 1700 million EUR annual dividend, meaning they are interested in maintaining the dividend payment. For this reason, it is very unlikely that Kering (PPRUY) will cut its dividend, unless there is a very big problem, and moreover, since this is also a payment channel for the family, if Kering can increase it, there is a good chance that it will.

Since everyone has to pay taxes on dividends, I don't really think this type of use of cash is optimal, especially if there is a clause like the ones above. Two years ago, Forbes estimated the Pinault family's wealth at EUR 31.2 billion, while last year it was EUR 25.7 billion. If we subtract Kering's 42% from this, there is still plenty of wealth left, but the family probably wouldn't let Kering (PPRUY) sink in case of trouble.

🏰Economic moat🏰

In this segment, I examined whether the company has any economic competitive advantage, which Warren Buffett referred to as an “economic moat,” which deters competitors from besieging the company’s fortress, i.e. its business, and taking over its market. In the case of Kering (PPRUY), these could be the following:

• 🫸Cost/scale advantage: yes, but not significant. Conglomerates always have economies of scale over smaller brands like Burberry (BRBY). They can pool resources and allocate more cash relatively freely between individual brands. However, exclusivity is much more important than size, as Hermès, for example, is not nearly the largest, yet they have the steepest prices and pricing power. The market is very fragmented, even the largest players do not own more than 10%, which shows how difficult it is to achieve large scale.
• 🫸Switching cost: none in the traditional sense. However, in many cases, the purpose of these products is precisely representation, so it is embarrassing to switch to a lower prestige brand. However, you should know that the younger generation is willing to add luxury accessories to fast fashion clothes, e.g. a Birkin bag to a Zara dress, but never the other way around. However, switching to another luxury brand is also not a disadvantage, instead of Gucci, you can wear a Dior, Chanel or Louis Vuitton product, without any loss of prestige.
• 🫸Network effect: none in the software sense. However, we can still talk about an indirect network effect. The more people buy and wear the brand's products, the greater the brand awareness and social prestige. This attracts new consumers, because in the luxury market the role of status and identity indicators is prominent. For example: if the Gucci logo is everywhere, it strengthens the symbolic value of the brand. Customers of luxury brands often perceive belonging to the brand as a kind of club membership.
• 🫸Intangible assets, know-how, trademark: yes. Most brands are protected by strong trademarks, which is why counterfeiting flourishes. Although I don't think that these companies have extremely complex production technology. However, making products by hand is a luxury that few manufacturers can afford. I think every luxury manufacturer can look back on a very serious history and heritage that is difficult to reproduce, and this is the basis of the trust in Várásló.
• 🫸Barriers to entry: high. Not only is it expensive to enter the segment, but it's also problematic, because you can't just create a Gucci name from scratch. A great example of this is the Fenty brand, which was a big flop. LVMH and Rihanna's collaboration failed, they simply couldn't sell the products to Rihanna's fan base due to the high price. Fenty Beauty and Savage x Fenty: The beauty and lingerie line, on the other hand, became successful. Fenty Beauty, a makeup brand also with Rihanna, and LVMH's Fenty Beauty by Kendo, revolutionized the industry with a wide range of skin tones and achieved billions in sales. Savage x Fenty lingerie exploded as an alternative to Victoria's Secret.

Rarity and exclusivity paradox: For something to be exclusive, it has to be relatively rare, because if you see the same product on every corner, it loses its prestige. In other words, a luxury manufacturer cannot sell too much of a product, because then it erodes its own brand power. Even though more and more people feel that they belong to a club, if the club is too big, after a while customers will not pay the premium for exclusivity.

💡This is the difference between Porsche (P911) and Ferrari (RACE): the former sold ~310000 cars last year, at an average price of ~129000 EUR, while the latter sold ~13752 units, at an average price of ~417000 EUR. The former made 40 billion in revenue, while the latter only made 5.7 billion EUR, yet the latter is the much more exclusive company and operates with a higher profit margin.

Overall, I think the narrow moat given by Morningstar is true for Kering (PPRUY), but the very large competitive advantage is not. This is clearly demonstrated by the company's continuous fluctuations, as this is not the first time the share price has fallen significantly. In contrast, Hermès and LVMH have broader economic moats, partly due to their stronger portfolio, higher exclusivity and larger size. At the turn of the millennium, the peak price was 256 EUR, and now the price of the paper under the ticker KER is 211.7 EUR, and Kering practically went sideways between 2001 and 2016. I don't mean to say that the share price will never rise, as it was 800 EUR, just that there are fluctuations in the life of the company, which can be caused by changes in fashion, but also by the crisis of the creative director.

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🎢Metrics of Kering (PPRUY)🎢

In this section, I examined what metrics characterize the company, how it stands on the revenue side, what margins it operates with, whether it has debt, what the balance sheet shows. I look for items that are extreme – too high debt, high goodwill, etc. - what return on capital the company works with, what its cost of capital is, how the revenue and cost sides are structured. I also examine trends, owner value creation, and how the company uses the cash generated.

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📈What is the S&P 500 yield?📉

Since many people use the US stock market index as a benchmark and also buy S&P 500 ETFs, it is worth looking at what companies are doing in aggregate (obviously, you should be happy if the company being analyzed exceeds these values).

S&P 500 2024 data:

• SP&500 revenue growth: +7%
• SP&500 profit growth: +10%
• SP&500 gross margin: 45%
• SP&500 net margin: 13%
• SP&500 ROE: 15%
• S&P 500 ROIC: 12%
• S&P 500 ROCE: 11%

Kering (PPRUY) has been in a pretty bad spot for the past two years. As you can see, the company is in a pretty deep slump, including in terms of revenue. The breakdown by region for 2024 is as follows:

What is not visible in the image above is the trend and where the revenue has been moving in the past. It is clear that practically every region has been falling since 2022. Unfortunately, the image is quite dense, so I wrote the numbers separately, projected for 2023 and 2024. Since Kering officially provides the data in EUR, I also stayed with this currency:

• 🌐Asia (excluding Japan): EUR 6848 million (+4.3%), EUR 5222 million (-23.7%) in 2023
• 🌐Western Europe: EUR 5405 million (-2.9%), EUR 4995 million (-7.6%) in 2023
• 🌐North America: EUR 4500 million (-18.9%), EUR 4095 million (-9%) in 2023
• 🌐Japan: EUR 1400 million (+12.5%), EUR 1423 million (+1.6%) in 2023
• 🌐Rest of the world: EUR 1413 (-0.8%), EUR 1459 million (+3.3%) in 2023
• 🌎Total: from EUR 19.6 billion to EUR 17.2 billion (-12.1%), but in the last 12 months EUR 15.8 billion, which is -8.3%

If we look at the revenue distribution of individual brands, it is also quite telling, because if customers turn away from a fashion brand, its revenue will necessarily fall:

• 👗Gucci: ~44.5%, EUR 7650 million (-23%), EUR 9873 million a year earlier
• 👠Yves Saint Laurent: ~16.7%; EUR 2881 million (-9%), EUR 3179 million a year earlier
• 🥻Bottega Veneta: ~10%; EUR 1713 million (+4%), EUR 1645 million a year earlier
• 🏠Other houses: ~18.7%, EUR 3221 million (-8%), EUR 3514 million a year earlier
• 👓Kering Eyewear and Corporate (glasses): ~11.2%, EUR 1941 million (+24%), EUR 1568 million a year earlier
• ✍🏻Descriptions: EUR -212 million, EUR -213 million a year earlier

🧴Kering Beauté

Previously, there was another category that included royalties, for example, because:

• a company called Coty owned the perfume and cosmetics rights to Gucci, YSK and Bottega Veneta
• In February 2023, it was reacquired by Kering and a new division was created to sell perfumes, this is Kering Beauté
• It also made a few acquisitions that brought it under Kering Beauté, such as Creed with 100% ownership and Matriere Premiere, in the latter with a minority stake.

Closely related to the above, Kering Beauté’s revenues are reported by Kering (PPRUY) in the “Kering Eyewear and Corporate” segment, which actually includes two sub-segments, Kering Eyewear and Kering Beauté. You can see this on the right-hand side of the previous structure: here.

However, I could not find specific revenue data for the Eyewear and Beauté brands separately, which leads me to conclude that the revenue from each brand is insignificantly low. Overall, the entire Eyewear+Beauté segment accounts for ~15%, but it would be good to know which brands are the driving forces. It seems that meaningful revenue comes from eyewear, with a ratio of roughly 5:1 between the Eyewear and Beauté segments. The high +24% growth compared to a year earlier, I think, may be due to new brands being added back into the portfolio, as the growth in the first half of this year was only +2%.

Kering basically distributes its products in two ways:

• directly to the consumer: 76% (of which 15% was previously online sales, but I couldn't find last year's), this means own store network
• as listed product: 24%

The difference between the two is that sales to direct consumers take place in physical stores, the number of which was 1813 at the end of last year, of which ~500 were Gucci boutiques.

💡Physical sales work well in the luxury industry because customers like to see high-priced, exclusive products in person, where the service is of a high standard befitting the product. 

That's why online sales are relatively low, around 15%, but since it doesn't feel like a physical purchase, it's not necessarily worth it for Kering (PPRUY) to push this channel. The listed products practically represent the product range of luxury stores, where Kering (PPRUY) probably earns less on a product because it has to pass on part of its profits to the intermediary partner.

I have analyzed the above so far because this is the best way to understand how many influences influence the development of the numbers in the case of Kering (PPRUY). I would not say that the above numbers are encouraging, but you can also know that the brutal increase in 2020-2022 was not entirely normal either. From EUR 13 billion to EUR 20.3 billion, consumers practically ran ahead with their purchases. This corresponds to an increase of 56%. Then the money ran out of the market, and Kering's (PPRUY) revenue plummeted, mainly due to the collapse of revenues in Asia, Europe and North America. Unfortunately, the data above shows that the numbers are falling in almost every segment.

Unfortunately, a much bigger problem is that operating results and profits have plummeted even more, and the company's profitability has practically been lost. It's rare to see a company's revenue develop like this:

• 2022: EUR 5589 million
• 2023: EUR 4746 million
• 2024: EUR 2554 million, which represents a -55% revenue decrease

If that weren't enough, net profit fell by 70%! in the case of Kering (PPRUY), which is a brutal decline to say the least, and it's rare to see anything like that. The problem is that in the first half of 2025, since European companies report semi-annually, this process does not seem to be reversing yet.

One reason for this is that Gucci provides the bulk of Kering's (PPRUY) profits, which have seen their sales plummet, dragging down the company's overall profits. It's hard not to say that Kering (PPRUY) is not a single-brand company, with Gucci accounting for nearly 50%. Of course, this is not a unique feature, as Merck Inc. (MRK) in the pharmaceutical industry is doing the same with its cancer drug Keytruda, while Brown-Forman (BF-B) in the alcohol segment is doing the same with its Jack Daniel's whiskey:

• Merck & Co. (MRK) Stock Analysis – Heads or Tails?
• Brown-Forman Stock Analysis (BF.B, BF-B) – Another Round?

The above revenue and profit losses have unfortunately also left their mark on margins. As you can see, the gross margin derived from the costs necessary to produce the product has been essentially the same for years, around 73%, but the trend of other margins is falling, the most spectacular being the collapse of the net profit margin, from the 15% range to 4.6%, which practically means a threefold decrease.

It's also worth looking at Kering's (PPRUY) cost structure. The cost of product production decreased slightly, but not nearly as much as the company was hit on the revenue side, while the values ​​associated with selling and administrative expenses increased proportionately. Since fashion companies have to advertise their products quite a lot to stay in the public eye, this is not surprising, and various exclusive events are not exactly cheap entertainment. I also included the number of employees, which has decreased by about 5000 people in two years, these layoffs are better called restructuring. This is a general luxury industry trend, not only Kering (PPRUY) is affected.

To top it all off, Kering (PPRUY) has tried to move forward in the past two years, either acquiring or taking stakes in several companies, which has resulted in significant financial burdens. Here too, the trend is worth watching, which is unfortunately worsening. Three years ago, it had EUR 4347 million in debt and EUR 4420 million in long-term lease liabilities, compared to roughly EUR 4000 million in cash. This year, its debt has jumped to EUR 9.5 billion, but its revenue and profitability have fallen significantly.

• 💰income: ~15760 million EUR (based on last 12 months)
• 🤑profit: ~EUR 730 million
• 🫰🏼cash: ~EUR 4240 million
• 💸net debt: ~9500+5125 million EUR (~100% of revenue, 2143% of profit!)*
• 💶net debt/EBITDA: ~ 5.4
• 👛interest coverage, EBIT/interest: ~ 3.1

* Kering (PPRUY) only lists EUR 9.5 billion in debt on its website, but in fact they also have more than EUR 5 billion in long-term lease obligations, which can be terminated, but are currently still in force (I think the data on the screener website I used is partially incorrect).

Since the increase in indebtedness and the decrease in profitability are a double effect, Kering (PPRUY) has very limited room for maneuver on the financial side. It is understandable that they are trying to make changes, including by adding new brands to the portfolio and replacing the creative director, but the results of this are not yet visible in the numbers.

🧮What do ROIC and ROCE metrics show?🧮

ROIC – Return on Invested Capital – shows how efficiently the company uses its total invested capital to generate profit. Read more here.

• It shows the company's fundamental value creation capability.
• It filters out the impact of the financing structure.
• If ROIC exceeds the cost of capital (WACC), the company is creating value.

ROCE – Return on Capital Employed – shows how efficiently the company uses its long-term financing sources. Read more here.

• It measures the profitability of business activities.
• It does not take into account tax effects.
• A good basis for comparison between different industry players.

Indicator	What does it measure?	Who is it useful for?	When is it considered good?
ROCE	Total return on capital	Long-term investors	If higher than the industry average
ROIC	Return on invested capital	Equity investors	If higher than WACC
ROE	Return on equity	Shareholders	If stable and sustainably high

Kering (PPRUY) Ownership Value Creation

On the owner value side, I usually look at what the company uses the free cash generated. Basically, a company can do the following things with cash:

1. reinvests it back into the business (see below)
2. reduced debt (on the contrary, increased it)
3. pays dividends (4.9% last year, with a payout ratio of 65%)
4. buys back shares (not typical)
5. buys up other companies (typical, this is also why the debt is growing)

In the case of Kering (PPRUY), the recycling has to be viewed differently than in the case of traditional companies, since here product development usually means the release of new collections. Of course, this can also be attributed to “research and development costs”. As for debt, you could see its growth rate, so there is no question of reduction for now.

Kering (PPRUY) is a dividend-paying company, paying a dividend of 4.9% last year, with a payout ratio of 65%. This amounted to EUR 1716 million. The big question is why Kering doesn't cut its dividend? Because then Artemis, owned by the Pinault family, would lose EUR 720 million in annual dividends, at least based on last year's figures.

On the positive side, although Kering (PPRUY) is not known for its large share buybacks, it does not dilute them much with options:

• 2021-2022: 2.6 million shares were repurchased, which is about 1%.
• 2023-2024: no specific purchase was made
• 2025: The general meeting approved a buyback program of up to 10% of the company's shares in April, which is the total amount Kering (PPRUY) can buy back from the market. Since the company currently owns 0.67%, management could theoretically buy back another 9.33% of the company.

The above only recorded a theoretical possibility, at a maximum price of EUR 700, for a total value of EUR 8.6 billion. But this danger does not threaten the company, since they do not have the money for it, and on the other hand, in the current situation, preserving their liquidity is much more important.

I've included another image above that shows shareholder return, which is the sum of debt reduction or increase, dividends, and share buybacks. Up until two years ago, the numbers were basically in the 3-5% positive range, but then debt started to blow a big hole in the graph. This is telling because fundamentally Kering (PPRUY) is a value-creating company, and we can consider this as the baseline rather than the opposite, but when the company got into trouble, things turned around temporarily. And here I would underline the word periodically several times, obviously aware that no one can predict the future.

As for value creation metrics, they essentially move in tandem with plummeting revenue and margin data. So the problem with Kering (PPRUY) is not just that they're not buying their products, but that they're not really creating value with the capital they've pumped in. According to Gurufocus, the company's weighted average cost of capital is 8.54%.

☝🏼WACC shows the average "return" a company must achieve on its invested capital to repay the expectations of shareholders and creditors. You should contrast this with the ROIC value, if it is higher than the WACC, then Kering (PPRUY) creates value.

This is the first company analyzed here. blogwhere ROIC is less than WACC, i.e. 3.8%<8.54%. For the sake of completeness, other sources say 6.2-6.5% for the cost of capital, but even this is higher than ROIC, which says it all. Kering (PPRUY) is currently destroying value, but I think this is a temporary state, the only question is the time frame in which this situation can change, I will return to this later.

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💵Kering (PPRUY) Acquisitions💵

In this section, I examine how acquisitive the nature of the company is and what impact each acquisition had on the life of the company, if any.

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Kering (PPRUY) and essentially all luxury brands have a reputation for being big acquirers, and the industry is undergoing continuous consolidation. Since Kering is largely a clothing and leather goods manufacturer, it has sought to diversify its portfolio without compromising quality. As of 2021, Kering has focused mainly on vertical integrations in the eyewear industry (LINDBERG, Maui Jim, UNT, Visard, Mistral, Lenti), while it has also been active in the perfume, also known as beauté, segment (Creed, Matière Première), and a large horizontal acquisition (Valentino) has completed the portfolio.

📜 Kering (PPRUY) Acquisitions (2015–2025)

Ev	Brand / Company	Segment	Share	Price (if known)
2021	🇧🇷 LINDBERG (Denmark)	Optical frames	100%	Not reported
2022	🇧🇷 Maui Jim (United States)	Sunglasses	90% → 100%	~1.5 billion EUR (press estimate)
2023	🇧🇷 UNT - Machinage & Nouvelles Technologies (France)	Eyeglass components	100%	Not reported
2023	🧴 Creed (France)	Luxury perfume house	100%	EUR 3.5 billion (press release)
2023	???? Valentino (Italy)	Fashion house	30%	EUR 1.7 billion (public data); option for full acquisition until 2028
2023	💍 Boucheron (France)	Jewelry workshop	100%	Not reported
2024	🧴 Raw material (France)	Niche fragrance brand	Minority shareholding	Not reported
2025	🇧🇷 Visard (Italy)	Eyeglass manufacturer	100%	Not reported
2025	🇧🇷 Mistral (Italy)	Eyeglass company	Minority stake (option until 2030)	Not reported
2025	🇧🇷 lenses (Italy)	Lens and sunglasses manufacturer	100%	Not reported

The above shows that Kering (PPRUY) not only made acquisitions, but also acquired options to acquire future stakes:

• 👗Valentino: Calling the remaining 70% would cost Kering ~4000 million EUR
• 🧴Raw material: we know neither the price nor the size of the share
• 🇧🇷Mistral: We do not know the price or the size of the stake, but we do know that the full acquisition can be completed by 2030.

From the above, it seems to me that Kering (PPRUY) was not entirely sure about the profitability of the brands it acquired in the future, and did not want to spend a lot of money to acquire 100% ownership of these companies. In order to judge how successful and expensive the acquisitions were, I dug out the available revenue and profit data, which you can see in the table below:

📊 Financial data of acquired companies (in EUR)

Brand / Company	Ev	Revenue (EUR million)	Profit (EUR million)	Comment
🇧🇷 Lindberg	2021	-	~ 37	Profit figure: DKK 280 million (2023)
🇧🇷 Maui Jim	2022	320-350	-	Analyst estimate, no official data available
🧴 Creed	2023	700-750	-	Press estimate, exact data unknown
???? Valentino	2023	1310	246	Public data, 2024
⚙️ UNT	2023	-	-	No public data
(I.e. Visard	2025	-	-	No public data
⚙️ Mistral	2025	-	-	No public data
🇧🇷 lenses	2025	-	-	No public data
🧴 Raw material	2024	-	-	No public data

The above is not helpful in many cases, as in many places there is no acquisition price, revenue data, or profit, and Kering (PPRUY) does not disclose these either, only the Eyewear segment, which generated a total of EUR 1583 million last year. In contrast, Creed was acquired at a revenue multiple of around 30 times, according to some sources, while Valentino's 35% was acquired at more than XNUMX times. These do not seem like outrageously expensive purchases, but they are difficult to compare to Gucci, which was once a brand that produced a XNUMX% operating margin. Are these acquisitions expensive? I don't know, so I looked at the write-down of assets and the goodwill differences from acquisitions, the former also includes the latter, but it could also be the write-down of unsold collections, for example. These are not significant numbers compared to the level of Kering (PPRUY), so this does not help to solve the problem.

I'm bringing up the above so much because in 2007, Kering (PPRUY), then known as PPR, had a rather botched acquisition of Puma, which did not fit into the portfolio at all and it took the company until 2018 to get rid of it. Moreover, to this day, the Artemis holding, which belongs to the Pinault family, still has a ~29.5% stake in Puma, worth approximately EUR 933 million, which is owned by Financière Pinault SCA.

Then I can also mention the Volcom acquisition for 608 million USD, which was also a non-luxury sports and lifestyle clothing brand, which they also got rid of in 2018. Although the 2014 acquisition of luxury watch manufacturers Ulysse Nardin/Girard-Perregraux fit into the portfolio, Kering (PPRUY) didn't do much with it either, selling them in 2022, realizing that they couldn't really compete with names like Rolex or Richemont's Vacheron Constantin, they would have to catch up.

❗Overall, I find it difficult to judge how successful Kering's (PPRUY) acquisitions are because the company's data is not transparent enough to extract the data from their reports.

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🤵Kering (PPRUY) Management🤵

In this section, I examine who runs the company and how. What is the bonus system, how much risk – skin in the game – do the managers take on while running the company? Is there a family connection, or perhaps a special “heritage” factor?

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Although Kering (PPRUY) is owned by Artemis, Kering is actually a holding company that brings together brands.

💡It's not by chance that brands are called houses, as they have their own management, the common framework only ensures financial freedom, while creative freedom belongs to the individual houses. This is necessary because it is not possible to effectively influence creative processes from the outside and to sense fashion or directly dictate it through external control. 

Therefore, it is actually worth examining the management of the three most significant brands, Gucci, Balenciaga and Yves Saint Laurent, separately, since they account for 71.2% of the revenue. However, no one should think that what is happening is not what the Arnault family wants. Since Artemis has a stake of about 41% in Kering (PPRUY), they have a majority vote against the other owners. Kering does not use a dual share structure, but then how can 41% be enough? Get to know the loi Florange law!

⚖️What is the Florange law?

• 📈Kering does not use a two-tier share structure, meaning there are no Class A and B shares, one of which provides additional rights, as is the case with Alphabet or Meta.
• 🧾According to French capital market rules (loi Florange), shares held for more than 2 years receive double voting rights.
• 🫰🏼Instead, it uses a system of double voting rights to ensure control by long-term shareholders, and thus the Pinault family. Because of this, Artemis' voting share is around 57-60%, so the Pinault family effectively controls Kering (PPRUY).
• 💎Other French luxury brands have similarly benefited from the law (LVMH – Arnault family, L'Oréal – Bettencourt family).

📌In practice: The above law was actually created in 2014 to protect well-known French brands against hostile takeovers. With the holding period of shares floating on the market in the US reduced to less than six months by 2024, investors are moving the shares among themselves, while the Arnault family has held most, but not all, of them since the 1990s. That's why their 41% stake cannot be automatically multiplied by two, because some of their shares are younger than two years. Since Artemis is a holding company, when Kering (PPRUY) buys back its own shares, they do not go to Artemis, but remain with Kering, which is why they limit the maximum number of shares that can be bought back to 10%. The other option is to completely withdraw it from the market, which would permanently reduce the number of shares.

🧠The most important person: the creative director

Although each house has its own management, the most important person is the creative director, denoted by CD. Since he dictates the pace of the creative process, it is primarily up to him to:

• 💫what image does a brand get?
• 💫who will it appeal to, who will be your future customers?
• 💫will the visuals be conservative (Sabato de Sarno) or unconventional (Alessandro Michele, Demna)?
• 💫when will the new collections be released?

📌In practice: Since creative work takes time, replacing the CD and appointing a new one is a big risk for the house, as it will almost certainly involve a change in direction. In the case of soaring sales, replacements are very rare, so the former creative director is usually fired when there is already trouble. Dreaming up new collections, ramping up production, presenting the products, and then getting them to stores is a slow process. Based on industry statements, this could take 5-6 quarters. That is, if a creative director is appointed in 2025, the impact of his work will first be visible in the first or second quarter of 2026.

As a result of the above, fashion brands can enter a "creative crisis", which is relatively difficult to escape from, something Kering has been suffering from for about 2 years now. Alessandro Michele's legacy was taken over by Sabato De Sarno from outside in early 2023, but the brand got rid of him in February 2025 because his minimalist style did not find an audience. Demna, who was the former creative director of Balenciaga, was appointed as his successor, meaning he came from within the company.

So, Demna's impact on Gucci will start to be felt sometime in the second or third quarter of 2026 at the earliest, based on current trends. I looked at the crises Kering (PPRUY) has gone through in the past:

🕰️ Cyclical crises and turning points

• 📉2008–2009: global financial crisis
  • Luxury demand plummets: Gucci and Bottega Veneta's sales have fallen. The company's revenue has stalled and profitability has declined.
• 👗2014–2015: Gucci crisis
  • Departure of Frida Giannini (creative director) and Patrizio di Marco (CEO). Gucci's sales fell, margins fell below 30% from 35-40%.
  • 👉 Solution: The appointment of Alessandro Michele (CD) + Marco Bizzarri (CEO) brought Gucci's renaissance after 2015.
• 👔2016–2018: Designer changes
  • Yves Saint Laurent: Hedi Slimane left (2016), replaced by Anthony Vaccarello, which was a successful change.
  • Bottega Veneta: out of steam (2018), Daniel Lee arrived, “New Bottega”, upswing.
• 🦠2020: COVID-19 crisis
  • Revenue down >15%, Gucci down -22%. Store closures, travel ban.
  • 👉 Digital sales and the rapid rebound of the Chinese market saved the balance sheet.
• 👗2022–2024: Gucci's next swing
  • Alessandro Michele left (2022). Gucci's sales are around -20% two years later.
  • 👉 Appointment of Sabato De Sarno, strategic diversification (Creed, Valentino, Eyewear).
    • 👉👉But Sarno failed with his overly conservative collection, and was succeeded by Demna Gvasalia.

📌In practice: Kering (PPRUY) crises have been caused by both external shocks (2008, 2020) and internal creative crises (Gucci, Saint Laurent, Bottega Veneta). Recovery has always been through leadership and creative changes, as well as strategic repositioning. However, in neither case have revenues and margins fallen as much as they are in the current situation, which is at least thought-provoking.

🧑🏼‍⚖️Separation of CEO and Chairman of the Board of Kering (PPRUY)

Meanwhile, another important thing happened: The son of founder Francois Pinault, Francois-Henri Pinault, who had been Kering's CEO since 2005, stepped down from his CEO position in 2025, handing it over to Luca De Meo. Luca De Meo will take over as CEO in September 2025.

What you need to know about Luca De Meo: Luca De Meo is not a fashion expert, but comes from the automotive industry. As CEO of Renault between 2020-25, he was essentially a crisis CEO, stabilizing the loss-making Renault group's numbers, reducing their debt and transforming the brand structure. Dacia falls under the Renault umbrella, which has become a real cash cow. Meo was previously CEO of Seat and marketing director of VW and Audi, but also worked at Toyota and Fiat.

How is he related to fashion? Not really, he's a crisis manager whose specialty is saving sinking ships. In other words, his task will be the same for Kering (PPRUY) as he previously did at Renault: reorganizing the company, cutting costs, and integrating the Kering Beauté, Eyewear, and Jewelry portfolios into the company. The creative directors will continue to be responsible for developing brand images.

👘Kering – Management (2023–2025)

Brand / Position	Name	Since when do you fill it?	Short profile
Kering - Chief Executive Officer, Chairman of the Board of Directors	François-Henri Pinault	2005–2025 (CEO), from 2025 only Chairman of the Board of Directors	Head of the Pinault family, the transformative leader of Kering (PPRUY)
Kering – CEO	Luca de Meo	From September 2025	Former Renault CEO, brand and organization building specialist
Kering - Deputy CEO Y.V.S - Chief Executive Officer	Frances Bellettini	-	Responsible for the strategic development and creative reorganization of brands
Kering- Deputy CEO, & COO	Jean-Marc Duplaix	-	Supervision of daily operations
Kering – CFO	Armelle Poulou	From 2023	Financial strategy and group-level control
Gucci – CEO	Stefano Cantino	From October 2024	It came from Louis Vuitton, its job is to stabilize
Gucci – Creative Director	De Sarno Saturday	2023–2025	“Gucci Ancora” collection, short reign
Gucci – Creative Director	Demna Gvasalia	From February 2025	New identity building from Balenciaga
Bottega Veneta – CEO	Bartolomeo Rongone	Since 2019	Modernization, new retail strategy
Bottega Veneta – Creative Director	Louise Trotter	Since 2025	Matthieu Blazy's successor, a new phase for the brand
Balenciaga – CEO	Cédric Charbit	From 2016	Brand business boost, retail expansion
Balenciaga – Creative Director	Demna Gvasalia	2015–2025	Provocative, anti-fashion direction, left in 2025
Balenciaga – Creative Director	Pierpaolo Piccioli	From July 2025	Former Valentino leader, beginning of a new era

From the above, it is clear that there have been an incredible number of personnel changes in the past 2 years, and there have also been changes between brands, as Demna moved from Balenciaga to Gucci. A big catch is CEO Stefano Cantino at the helm of Gucci, who was poached from direct competitor Louis Vuitton (owned by LVHM). It appears that Kering (PPRUY) management has replaced Gucci's key people, focusing primarily on this brand, as it accounts for half of its revenue.

The above, however, raises a lot of questions, including how successful the new management will be. I admit, I have no idea, it is simply impossible for me to judge the outcome of the story at this moment. But a few questions that came to mind:

• ❓Will Demna's transfer from Balenciaga to Gucci drag down the former brand? Balenciaga's revenue is around 1.66 billion EUR, which is not a small amount, but Gucci obviously brings in many times that, ~7.6 billion EUR, but this could also create a situation where Gucci will not be successful, but Balenciaga will start to decline.
• ❓Can an automotive professional be successful in the fashion industry? I think Luca De Meo's skills could be good enough to turn around Kering's (PPRUY) fortunes, provided he can work with the creative director and the new collections are successful.
• ❓Does Kering have structural problems or are these just problems affecting the industry globally? Although the prices of all luxury industry players have fallen, I think it's the former in the case of Kering.
• ❓Is Kering really a luxury player or does it represent lower quality? Why aren't shares of LVMH, Richémont and Hermès falling like Kering's numbers?

I omitted the executives' capital exposure to Kering and their remuneration from the analysis, as well as management comments, because so little time has passed and so many personnel changes have occurred that I think these are not yet relevant. Instead, everyone should follow the Q and H reports released over the next few quarters very closely.

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🆚Competitors: Kering (PPRUY) opponents🆚

In this section, I examine who the competitors of the analyzed company are, what is their market position, whether they are in a subordinate, secondary or superior role. What is their market share and what is their specialty? Are they losing or gaining market share to their competitors?

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In the soft luxury industry, leather goods generate the most revenue, while among hard luxury products, jewelry and watches. Aside from auto manufacturing, Kering (PPRUY) competes in countless segments, so I tried to gather the competitors in all sub-segments. For me, one of the big questions is how luxury Kering's portfolio is, compared to, say, an LVMH or an Hermès, or do their brands just dance between luxury and premium, like Porsche in the case of car manufacturers? It's worth reading their analysis, it clearly highlights why it's not on the same level as Ferrari: Porsche AG (P911) Stock Analysis – They're Not Pressing the Gas.

But back to the fashion industry, let's see the following segments:

• 👗Clothing industry: It's really just a complementary market for leather goods, with Prada and Dior perhaps the biggest rivals, while Moncler and Burberry could also be included alongside the lower-ranked Kering brands.
• 👜leather goods: Kering has a revenue of ~9.3 billion EUR from this. The market leaders in bags are Hermès and Louis Vuitton (LVMH), but if we look at the entire luxury leather goods market, Louis Vuitton leads with ~9%, followed by Gucci as the second largest player with ~8%, while Bottega Veneta captures ~1.5-2% of the market.
• 💍jewelry: ~0.5 billion EUR, Kering is not a factor in this market, but one of the biggest rivals could be Cartier
• ⌚luxury watch: Kering has virtually no exposure here.
• 🧴perfume (Kering Beauté): ~0.3 billion EUR, Kering is not a factor in this market, but one of the biggest rivals could be Chanel.
  • cosmetics: In fact, this is the previous submarket, Kering has an even smaller share here than in perfumes. Estée Lauder and L'Oreal are the two largest players.
• 👓glasses: ~1.6 billion EUR, small but fast-growing Kering segment, largest player is EssilorLuxottica.

👜 Leather goods/fashion main competitors

• Hermes: ultra-luxury, leather goods dominance (Birkin, Kelly). Characterized by extremely strong price inelasticity and brand loyalty.
• LVMH (Louis Vuitton Moët Hennessy): the world's largest luxury group. Vuitton, Dior, Celine, Loewe, direct competitors in the Gucci, YSL, Bottega Veneta lines.

📌In practice: I don't think Kering is anywhere near the ultra-luxury level of Hermès, but since they travel in leather goods, the two companies will definitely clash on the bag front, for example. LVMH is perhaps the biggest direct opponent, because here the brands of the two conglomerates are relatively easy to compare:

💎 Jewelry and watches

• Richemont (Cartier, Van Cleef & Arpels, Piaget, Jaeger-LeCoultre, Vacheron Constantin, IWC, Panerai): the biggest competitor in the luxury jewelry and watch category.
• Cartier: It can be highlighted separately because it is one of the strongest luxury brands in its own right, with a market value comparable to Gucci.

📌In practice: if it's jewelry, then Cartier, which is a concept, and if there's one thing Kering is weak about, then it's this segment. Kering (PPRUY).

👓 Glasses / Eyewear

• EssilorLuxottica: market leader in the global eyewear market (Ray-Ban, Oakley, plus optical networks). Kering Eyewear is growing dynamically, but is still a small player compared to the size of Luxottica.

📌In practice: It's a fast-growing segment at Kering, and anything could happen, but EssilorLuxottica is a real mammoth compared to Kering.

💄 Cosmetics and beauty industry

• LVMH Parfums & Beauté (Dior, Givenchy, Guerlain): direct competition for Creed and Kering Beauté.
• Estée Lauder, L'Oréal (L'Oréal Luxe division: Lancôme, YSL Beauty, Armani Beauty): these groups dominate the luxury cosmetics market.

📌In practice: Kering has made significant acquisitions in the perfume segment and here too it mainly competes with LVMH. I think the luxury cosmetics market is duopolistic, L'Oréal is far ahead in market share, Estée Lauder is second but still significant, Kering is currently invisible in the market.

I don't think Morningstar really picked out Kering's (PPRUY) opponents well. Tapestry typically sells products in the affordable luxury category, which is often mocked with the term masstige, which is a mix of mass + prestige. I think this is anything but luxury, and the same is true for Burberry, and while the Burberry pattern is legendary, it is a single-brand premium company that does not reach the level of Kering (PPRUY). From the above comparison, Hermès and LVMH remain the same, while Richemont, in my opinion, prefers hard luxury products.

I quickly plotted the revenue figures for the three companies, and the graph paints a pretty grim picture. Hermès caught up with and then overtook the previously larger Kering, while LVMH has always been light years ahead of PPRUY. The trend is pretty clear, with Kering (PPRUY) falling like a stone in a well compared to the other two. LVMH is also weakening, while Hermès is steadily rising.

The next picture doesn't look any better, the difference here is also shocking at the moment. However, in 2020-2022, Kering and LVMH moved much better together, and Hermès has always been a higher quality company than the other two.

Finally, capital utilization and value creation. I don't think it needs much explanation that out of the nine lines, the top three all belong to Hermès, while the next three belong to LVMH. Hermès is simply a much higher quality company than the other two, but when Kering (PPRUY) did well, it was able to match LVMH's performance for years. But now this is not true, Kering is clearly the weakest member of the trio.

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⚡What are the risks of Kering (PPRUY)?⚡

In this section, I examine all the risks that could affect the company's long-term future. Currency, regulatory, market disruption, and so on.

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Kering (PPRUY) risks are relatively company-specific at the moment, but of course, general risk factors affecting the entire luxury industry can also be mentioned. It is clear that the luxury industry is suffering, not only Kering's revenues have fallen, Hermès is rather strengthening the exceptions. However, Kering also has a lot of structural problems that cannot be solved by the bad economic situation.

🌍 Geopolitical and macroeconomic risks

• Trump tariff risk: A potential new US administration could reintroduce tariffs on European luxury goods (e.g. leather goods, alcohol), which were last set at 15%. The US is the second largest luxury market, making Gucci and Yves Saint Laurent particularly vulnerable.
• Slowdown in Chinese demand: China has been the driving force behind the luxury market over the past decade. If consumption weakens there, Kering is particularly affected (~35% of Gucci's revenue comes from Asia).
• Currency fluctuations: Most of the revenues are realized in dollars and yuan, but the result is calculated in euros, which gives rise to an exchange rate risk (the paper is reported in EUR for the KER ticker, and converted to USD for the PPRUY ticker).

📌Opinion: I have written about Trump tariffs in many analyses., this is essentially a factor that is difficult to calculate, which is especially serious for luxury manufacturers in the sense that they cannot even transfer production to America, as traditions do not really allow this. Especially handmade, very expensive leather goods are tied to France and Italy, but luxury buyers will probably be able to bear the passing on of tariffs in the form of price increases. I think the slowdown in Chinese demand is temporary, this is true for all companies in the luxury market in general.

👗 Creative and managerial risks

• New creative director at Gucci (Demna): The brand has fallen sharply in 2022-24, and the new creative direction has not yet been validated by the market. If it fails, Gucci's performance could remain permanently low.
• New CEO at the helm of Kering (Luca De Meo): He is an experienced turnaround specialist, but comes from the automotive industry and needs to prove himself in luxury.
• Scandals: The Balenciaga 2022 advertising campaign scandal showed that a single bad communication can cause global reputational damage. This can threaten any brand (e.g. social media effects).

📌Opinion: Kering (PPRUY)'s biggest risk is that we don't know how the new leaders will perform. Fashion is difficult to follow, driven by very elusive dynamics that are difficult to describe with numbers. Luca De Meo has no experience in the fashion industry, but he is a true company rescuer, which you can see a lot in, both positively and negatively. Anyone who remembers the Balenciaga scandal knows that an event that offends public taste can always significantly reduce a company's sales, so this risk must also be taken into account.

📉 Financial risks

• Debt portfolio: Kering made significant acquisitions in 2023–24 (Creed, Valentino 30% stake). These increased debt, while Gucci's weakening caused cash flow to decline.
• Margin pressure: Gucci's profit margin was over 35% at its peak, but is now hovering around 20%. If the trend does not reverse, the group's profitability could be permanently damaged.

📌Opinion: In my opinion, the second biggest risk is the significant debt. They've spent a lot of money on acquisitions while revenue has virtually disappeared. That's a huge headwind and it's going to take a long time to work off the interest that's being paid. I think Artemis Group will stick with the dividend until the very end, which will burn a lot of money again. This is one of the worst forms of cash disbursements ever. All of this comes with a margin squeeze that could be permanent, although I don't think the Gucci brand name is not strong and will disappear from the stage of history.

🔮 Market and consumer risks

• Change in consumer tastes: In the luxury market, a creative wave (e.g. Y2K fashion, the quiet luxury trend) can rearrange demand overnight.
• Sustainability pressure: Regulatory and consumer expectations for a green transition are growing. If Kering cannot position itself authentically, it could suffer a competitive disadvantage.

📌Opinion: Since young people are becoming more environmentally conscious, second-hand clothes are no longer a problem, and some cheap sets are even easily combined with expensive Birkin bags. This also means that customers are making more conscious choices, for example, paying attention to the environmental impact caused by the clothing industry. I think this is more of a concern for fast-fashion, mass-produced clothing manufacturers than for luxury brands that produce low-volume products. Changes in consumer tastes are a huge random factor in themselves, and it's hard to predict. Although Kering (PPRUY) is not a single-brand company, Gucci provides the bulk of its revenue, so if it does well, Kering does well too.

I made a self-check list that confirms the thesis about the company:

1. low or zero debt: YES/PARTLY/NO
2. significant economic benefit that can be protected in the long term: YES/PART/NOT
3. excellent management: YES/PARTLY/NO*
4. excellent indicators, significant owner value creation: YES/PARTLY/NO
5. the majority of the total return comes from reinvesting the cash generated, not from dividends: YES/PART/NOT
6. appropriate company valuation: YES/PART/NOT

* we don't know at this time

I couldn't really give Kering (PPRUY) a particularly high score because it hasn't performed well in any segment in the past 2 years. And the leadership changes have put a lot of moving parts into the equation, while Kering's (PPRUY) success depends on them to a large extent. Because of the Gucci, YVS, and Bottega Veneta brands, I think Kering has a narrow moat to protect its market, but the other brands are basically just frills next to them. Until segments like eyewear or perfumes grow, they are not worth considering. It is certain that in terms of quality, Kering (PPRUY) is much weaker than Hermès, and currently even LVMH, which is a more diversified, much larger company. I don't like to bet on 3rd place in a market, and that wasn't even about Richemont.

😢My biggest problem, however, is that it is very difficult to judge companies that are strongly influenced by fashion. It is a poorly quantifiable, unplanned effect, which in itself represents a huge risk. The industry is not close to me, and as the saying goes: it is better not to poke at what you do not understand. 

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👛Kering (PPRUY) Valuation👛

In this section, I will examine the company's current valuation compared to historical values ​​and consensus fair values.

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Rating metrics

In the two rows below you can see valuation metrics. The first row shows the current valuation, the second row shows the historical valuation. Although I don't think these metrics are particularly good - they hide a lot - they can be used as a benchmark.

• Share price (2025-08-28) 27.38 USD; P/E: 41.3; EV/EBITDA: 12.12; P/FCF: 20.68 (Based on Finchat.io)
• Historical median valuation (10-year average): P/E: 25.56; EV/EBITDA: 14.12; P/FCF: 23.51(Based on Gurufocus)

Why don't you see a DCF model in this segment? Because each input data produces a huge variance in the output, and most of the data is an estimated value. Therefore, the valuation will never actually be a single exact number, but rather a range can be defined where the current valuation falls.

You should apply a margin of safety to this price range, according to your risk appetite. 

So don't expect an exact price, no one can say this for a stock. However, there are fair value prediction services, almost every major stock screening site has one, I've aggregated them below. However, if you want a good stock support service, subscribe to The Falcon Method (The Falcon Method), entry prices are given for the stocks analyzed there.

Rating I have given the average prices for PPRUY (ADR conversion ratio: 10:1, for PPRUY:KER tickers)

• Wall street estimates: 16.91-39.07= 27.99 USD (I took into account the Alphaspread, the average of the two extreme values:)
• Peter Lynch Median P/E: $14.1
• Morningstar: $42.06 (5 stars)
• Gurufocus: $40.93
• AlphaSpread: $23.56 (12% overvalued compared to the base case)
• SimplyWallst: $28.74

Average (based on 6 reviews): $29.54 (8% underrated)

How to interpret the numbers? The above “margin of safety” rule should be applied according to your convictions, so if you really believe in the company, you can buy it at fair value, but if you proceed in 10% increments (whose convictions are strong), the math would look like this:

• 10% margin of safety: 29.54*0.9=~26.6 USD
• 20% margin of safety: 29.54*0.8=~23.6 USD
• 30% margin of safety: 29.54*0.7=~20.7USD
• 40% margin of safety: 29.54*0.6=~17.7 USD
• 50% margin of safety: 29.54*0.5=~14.88 USD

Of course, the list could be continued indefinitely, but the point is that the right purchase price for you is determined by the level of your conviction.

🧮What is NOPAT Yield?

I didn't mention NOPAT yield in previous analyses, but it's worth getting to know this metric. NOPAT stands for Net Operating Profit After Tax, so one of its biggest advantages is that it filters out distorting accounting items, such as:

• the descriptions: are one-off in nature, often occurring during a crisis (e.g. store closures, inventory write-downs, goodwill impairment). These greatly distort net profit, while not necessarily affecting long-term operations:
• depreciation and amortization (D&A): accounting items, not involving cash expenditure, often represent very large amounts (e.g. in the case of goodwill, intellectual property of luxury brands), and do not necessarily reflect actual operating cash flow. Remember the EBITDA indicator? This stands for Earnings Before Interest, Tax, Depreciation and Amortization, so it includes items that NOPAT does not, and also shows a pre-tax situation.
• cash and debt: to calculate the NOPAT yield, you also need the value of the company, which includes the capital from external sources, i.e. debt. This is important because the value of the company is in the numerator, i.e. if the company has no debt adjusted for cash, you will get a higher value for the NOPAT yield, i.e. the company will be cheaper. This is also important because companies burdened with debt not only indirectly degrade the valuation ratio, but also run extra operational risks.

I don't usually use NOPAT yield because the filter sites don't usually release this data. However, I do use NOPAT, so I looked up the company's value for 5 years using stockunlock.com and divided them up. The final result will be a percentage, the higher the better. I added the revenue and profit data and put together a table:

Ev	Revenue (€ billion)	Operating profit (€ billion)	NO PAT (€ billion)	Company value (€ billion)	NO PAT Yield
2021	17.645	5.017	3.598	93	3.87%
2022	20.351	5.589	4.044	66	6.13%
2023	19.566	4.746	3.443	62	5.55%
2024	17.194	2.554	1.857	45	4.11%

The interpretation of the above is as follows: there is a 2021% difference between the 2024 and 6 NOPAT yields, but in the meantime the company's value has fallen by 52%! So it may seem cheap at first, but in fact the price is still roughly where it was, with the difference that in 2021 they had a much higher operating profit and NOPAT.

(I.e.These types of price drops, which follow deteriorating fundamental indicators, are usually also called a falling knife.

The falling knife effect is an investment slang term used to describe when a stock or any asset is in a steep decline and investors try to buy it cheaply, but the price falls even further as it falls. It typically occurs in companies where rapidly deteriorating fundamentals, such as revenue and profits, or market panic cause the price to suddenly plummet, making the company look cheap, and Kering (PPRUY) looks very much like that. The problem is that even at this price, Kering (PPRUY) is not really cheap. This is the first analysis of its kind here. blogon, where I have to say, even at this price it's not an exceptional buy, as it's almost around its fair value.

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🌗Significant news and the last quarter🌗

In this section, I will examine what happened in the last quarter, whether there were any significant news/events. If the company reports semi-annually, we examined this period.

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Kering (PPRUY) reported its last quarter in July 2025. In fact, since it is a European company, they officially publish semi-annual reports, but due to ADR, they also have a quarterly report. The news below covers the events of the entire first half of the year:

📊 Kering (PPRUY) 2025 HXNUMX key financial data

• Group revenue (H1 2025): EUR 7.6 billion, a 15% decrease compared to last year
• Q2 revenue: EUR 3.7 billion, a 18% decrease compared to last year
• Operating profit (EBIT): EUR 969 million, down 39% year-on-year; operating margin: 12.8%, or -470 basis points.
• Group net profit: EUR 474 million, a 46% decrease compared to last year
• Free cash flow (FCF): EUR 2.4 billion, of which EUR 1.3 billion came from property sales.

🏷️ Kering (PPRUY) performance by brand

Brand / Division	Revenue (H1 2025)	Change	EBIT / Margin
Gucci	Significant decrease	–26%	EUR 486 million (~16% margin, -8.7%)
Yves Saint Laurent	Moderate decrease	–11%	EUR 262 million (20.4% margin, -1.6%)
Bottega Veneta	Growth	+ 1%	EUR 127 million (15% margin, +0.5%)
Other Houses	Decrease	–15%	-29 million EUR (loss)
Eyewear & Corporate	Growth	+ 2%	EUR 126 million (+25% increase)
Kering Beauté	Growth	+ 9%	Positive, stable profit

📌Note: Gucci used to be a brand with a ~35% margin, now it's down to 16%, which is pretty bad. In addition, YVS's revenue is also falling. By the way, it's positioned below Gucci, Bottega Veneta is a bit more premium, it's still holding its own, but it's still a bit short of salvation. In contrast:

• LVMH: 3% organic revenue decline
• Hermes: 8% organic revenue growth

Unfortunately, the contrast with competitors is quite large, which not only points to general industry problems.

🌍 Geographical evolution of Kering (PPRUY) revenue

• 🌐Western Europe: -17%
• 🌐North America: -10%
• 🌐Asia Pacific: -19%
• 🌐Japan: -29%

🛠️ Strategic response and leadership change

• 🧑🏻‍⚖️Leadership structure: It was announced that Luca de Meo will take over as CEO from September, while François-Henri Pinault will retain the role of chairman.
• 🫰🏻Cost reduction and restructuring: store closures, cost optimization and organizational restructuring began. The goods arriving at the listed stores were cut by 50% and 40 stores were closed, leaving approximately 500 Gucci boutiques.
• ✍🏻Market situation: Gucci's weakness dragged down the group's performance, but Bottega Veneta and Eyewear showed growth, although these don't really change the overall picture.

📌Note: Regarding the cost reduction and restructuring part, I would add that this has actually started earlier, as Kering announced a 4% workforce reduction at the end of last year. This is compounded by the fact that Kering (PPRUY) spent EUR 4 billion on acquiring stores in certain key locations, mainly in New York, Milan and Paris. According to insiders, Kering overpaid for these properties to crowd out competitors and ensure that Gucci, YVS and Balenciaga are represented in the best locations. According to reports, the company now needs to exit these interests to raise more cash. The purchases involved the following locations:

• 🏢New York, Fifth Avenue: 885 million EUR, 10700 square meters
• 🏨Milan, Monte Napoleone 8: 1.3 billion EUR, in which businesses have already operated before, e.g. YVS.
• 🏩Paris, Place Vendôme & Avenue Montaigne: EUR 837 million, 60% ownership in three iconic buildings sold, 40% retained

😢The credit rating agencies have announced that they will downgrade Kering (PPRUY) for the third time in three years. I don't usually give much thought to these downgrades, but 3 in a row is already telling, and it will also be harder for the company to get new loans and they won't be able to renegotiate the old ones.

Other factors hindering Kering (PPRUY)

• 😢Kering previously announced that it would acquire Valentino in full by 2028 from Mayhoola, an investment fund backed by the Qatari royal family. However, put options included in the agreement could oblige Kering (PPRUY) to purchase the remaining 2026% as early as May 70. Depending on Valentino's performance, this could require up to an additional EUR 4 billion.
• 😢In April, Kering said its cost-cutting program, which includes store closures and layoffs, could allow it to finance an early buyout if needed. The company also noted that it could use up to 3 million Kering shares, or 2.4% of its equity, to pay part of the purchase price. I don't know exactly what that means, but I assume it's not a new issue, but a transfer of existing shares.
• 😢In addition, Artemis, which owns Kering, is also in trouble as it may have to repay EUR 500 million in cash to investors due to the maturity of a convertible bond triggered by Puma's poor performance.

📌Note: Artemis previously spent around EUR 3.5 billion on the acquisition of talent agency CAA, and its debt has increased to EUR 26.7 billion this year at the group level. Since Artemis SA is a privately held company, their numbers are not entirely clear, but I think this EUR 26.7 billion already includes Kering's debt. It roughly breaks down as follows:

• 💰Artemis's independent debt: ~7.1 billion EUR. The holding company's own debt, which is related to the financing of Christie's, Château Latour, CAA agency and other investments, does not include the debt of Kering (PPRUY).
• 💰Kering's net debt: EUR 9.5 billion

No matter how I look at it, this looks terribly bad, not only is Kering terribly in debt, but also the parent company Artemis.

Next quarterly report: 2025.10.23.

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✨Other interesting facts about Kering (PPRUY)✨

Everything that was left out of the previous ones, or if there is any special KPI - key performance indicator - or concept that needs to be explained, is included here.

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Pinault family: Kering (PPRUY) is founded by Francois Pinault, who until 2005 headed Pinault-Printemps-Redoute, or PPR, which was renamed Kering in 2013. Since 2005, his son, François-Henri Pinault, has led the conglomerate through the Artemis holding company. Artemis also owns other brands, including Château Latour, Christie's, Pinault Collection, Creative Artists Agency, and part of Puma. He has been married to Salma Hayek since 2009. The Pinault family also owns the Stade Rennais FC football team. They contributed a large sum of $113 million to the reconstruction of Notre-Dame in 2019.

Invisible luxury: The LV logo of Gucci or Louis Vuitton is world famous, but there is a new movement emerging, the silent or invisible luxury, which is only recognized by those who are really rich. That is why Hermès bags often do not have logos, only those who also have them, i.e. if another ultra-rich person comes across them. The brands belonging to the silent luxury: Loro Piana, Brunello Cucinelli, Loewe and Bottega
Venetian

Mark Zuckerberg's gray T-shirt: Mark Zukerberg, but I could also mention former Apple CEO Steve Jobs, is known for his simple, no-frills dressing. However, this is a scam in Mark's case. The gray T-shirts are made by the luxury brand Brunoello Cucinelli, and cost 300-400 USD each. This also belongs to the invisible luxury.

🔑Key Performance Indicators (KPIs)🔑

• Gucci sales: Gucci accounted for half of Kering's (PPRUY) revenues and two-thirds of its profits. Until its turnover recovers, I don't see much good for Kering, so this needs to be monitored closely.
• Luca De Meo and Demna's activities: Demna is the creative director of Gucci, and it practically depends on him where the brand goes next, while Luca De Meo will be responsible for managing the entire Kering group. But how they will perform is still a mystery, and their activities will also have to be followed closely.
• Territorial sales: Kering's largest markets are the US and Europe, but these are mature markets, with Asia being the fastest growing. The big question is what will happen to these.
• Eyewear and perfume segment: fast growing but currently small part, this could be the future engine of Kering (PPRUY). However, I am not convinced that they did not overpay for Creed or some eyewear brands, for example. So the write-offs in the balance sheet and income statement should also be monitored.

Summary of Kering (PPRUY)

Summary of the analysis, drawing lessons.

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Luxury conglomerate Kering (PPRUY) has been in the spotlight recently, mainly due to the weakness of Gucci, which accounted for roughly half of its revenue and two-thirds of its profits. When it was still there, because the company's metrics were really bad, and the entire industry was under huge economic pressure. This is compounded by what I believe are many bad decisions on the part of management, including the acquisition of countless brands, real estate, and the accumulation of significant debt.

The last creative director also failed to deliver on his promises, so Kering (PPRUY) made several leadership changes in 2025, the impact of which is still incalculable. Like the changes in fashion, it is very difficult to judge whether the company can emerge from its deepest crisis. My biggest problem is that fashion is very difficult to quantify, it is full of subjective elements, I think it is almost impossible to estimate whether a product will suit the taste of the customers or not.

I am willing to take such a risk if the low valuation provides a sufficient margin of safety. However, this is not the case in the case of Kering (PPRUY), as the stock is not trading much below its fair value, so I would not even call it cheap. The current situation looks like a very dangerous situation, and catching them is always very dangerous, it's a real turn-around story. Kering (PPRUY) is not a sleepy stock, and it is certain that it will struggle for years before it can rise again. If the situation ever turns around, and even if it does, something will have to be done about the gigantic debt.

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Frequently Asked Questions (FAQ)

Which broker should I choose to buy shares?

There are several aspects to consider when choosing a broker - we will write a complete article about this - but I would like to highlight a few that are worth considering:

• size, reliability: The bigger a broker, the safer it is. Those with a banking background – Erste, K&H, Charles Schwab, etc. – are even better, and well-known brokers are typically more reliable.
• expenditures: Brokers operate with various costs, such as the account management fee, the portfolio fee - which is the worst cost -, the purchase/sale fee and the currency exchange cost (if USD is not deposited in the brokerage account)
• Availability of instruments: It doesn't matter which broker has which market available, or whether they add the given instrument upon request and how quickly.
• account type: cash or margin account, the latter can only be used for options. For Hungarian tax residents, having a TBSZ account is important, but citizens of other countries also have special options – such as the American 401K retirement savings account – which are either supported by the broker or not.
• surface: is one of the most underrated aspects, and it can be a real pain. Anyone who had an account with Random Capital, a now-defunct Hungarian broker, knows what it's like to work on a platform left over from the 90s. Erste's system is lousy slow, Interactive Brokers requires a flight test, and LightYear believes in simple but modern solutions.

Based on the above, I recommend the Interactive Brokers account because:

• the world's largest broker with a strong background
• a few million instruments are available on it, and shares listed on multiple markets – e.g. both the original and the ADR – of a single share are often available
• Interactive Brokers a discount broker, they have the lowest prices on the market
• you can link your Wise account to them, from which you can quickly transfer money
• Morningstar's analyses are available for free under the fundamental explorer (good for analysis)
• EVA framework data is available under fundamental explorer (useful for analysis)
• they have both cash and margin accounts, Hungarian citizens can open a TBSZ
• you can use three types of interfaces: there is a web and PC client and a phone application

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What do you need to know about the Gucci brand?

Gucci is Kering's most important brand, one of the most well-known representatives of Italian luxury fashion. It became world famous for its eclectic, often extravagant style, but in recent years its sales have declined significantly, which has had a serious impact on Kering as a whole.

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What should you know about the Bottega Veneta brand?

Bottega Veneta, a symbol of discreet luxury and fine leather craftsmanship, is renowned for its understated, logo-free designs. It is a stable, balanced growth within Kering's portfolio.

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What do you need to know about the Balenciaga brand?

Balenciaga is a representative of avant-garde, often provocative and daring luxury fashion. In recent years, it has conquered a younger audience, but has repeatedly come under the spotlight due to its scandals.

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What should you know about Yves Saint Laurent?

YSL is an iconic brand in French fashion history, made legendary by the modern women's pantsuit. Today, it is one of Kering's top-performing fashion houses, with strong growth.

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What should you know about Cartier?

Cartier is one of the flagship brands of Richemont and one of the most recognized jewelry and watch brands in the world. Thanks to its extremely strong brand value, it is firmly at the top of the luxury industry.

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What should you know about Prada?

Prada is an Italian luxury house known globally for its minimalist, modern design and innovation. It is owned by the Prada Group, which also includes Miu Miu.

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What do you need to know about Versace?

Versace is the epitome of Mediterranean luxury and bold, striking style. Currently owned by the Capri Holdings group, it is known for its iconic motifs.

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What should you know about the Giorgio Armani brand?

Giorgio Armani is an independent luxury brand that remains family-owned. Synonymous with clean elegance and classic lines, it is particularly strong in men's fashion.

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What do you need to know about LVMH?

LVMH is the world's largest luxury group, owning more than 70 brands in the fashion, cosmetics, beverages and jewelry segments. Its leadership and financial strength make it a dominant player in the market.

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What do you need to know about Hermès?

Hermès is the epitome of artisanal luxury, best known for its Birkin and Kelly bags. It is one of the world's most profitable luxury brands, with leather goods accounting for nearly half of its revenue.

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What should you know about Richemont?

Richemont is a Swiss-based holding company that is strong in jewelry and watch brands. Its portfolio includes Cartier, Van Cleef & Arpels, Piaget and Jaeger-LeCoultre, making it one of the largest players in the jewelry market.

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Legal and liability statement (aka. disclaimer): My articles contain personal opinions, I write them solely for my own entertainment and that of my readers. The articles published here do NOT in any way exhaust the scope of investment advice. I have never intended, do not intend, and am unlikely to provide such in the future. What is written here is for informational purposes only and should NOT be construed as an offer. The expression of opinion is NOT in any way considered a guarantee to sell or buy financial instruments. You are SOLELY responsible for the decisions you make, and no one else, including me, assumes the risk.