Chinese consumers are turning to brands with higher levels of desirability or exclusivity, Barclays analysts say
FRENCH fashion designer Kering slumped to a seven-year low on worries about demand in China, with the Gucci brand owner among the worst-hit stocks in the recent luxury-sector sell-off.
Kering fell as much as 4.3 per cent on Monday (Sep 9) – the most in about seven weeks – as analysts at Barclays cut their recommendation on the stock to “underweight” for the first time since 2022, downgrading it from “equalweight”.
The latest decline came even as peers like LVMH and Hermes saw modest rebounds from the rout last week, which was spurred by worries over demand largely stemming from Asia.
“Gucci appears particularly hard hit by the Chinese slowdown,” Barclays analysts said.
Consumers in China are being more selective in the current economic environment, focusing on brands with even higher levels of desirability or exclusivity, they noted.
While consensus among analysts is for Gucci to report organic growth of 5 per cent in fiscal 2025, Barclays sees a risk of Gucci still being in negative territory next year.
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Kering’s stock has tumbled 43 per cent year to date, putting it on course for its worst annual return since the global financial crisis. This comes as the company grapples to turn around the Gucci brand, after appointing a new designer last year.
Analysts at RBC Capital also downgraded their rating on Kering on Monday, cutting the stock to “sector perform” from “outperform”.
Just six analysts now have buy-equivalent ratings, down from a peak of 23 “buys” in 2022, indicated data compiled by Bloomberg.
A further 21 analysts currently have “hold” ratings, while five view Kering as a “sell”. BLOOMBERG
