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Kering SA shares soared to the highest level in almost 15 months after Morgan Stanley analysts crowned the Gucci owner as their top pick among European luxury stocks.
The team led by Edouard Aubin upgraded the Paris-based firm to overweight, alongside national rival LVMH Moët Hennessy Louis Vuitton SE, citing fresh industry momentum spurred by a wave of new creative directors replacing long-tenured predecessors.
The duo “will be potentially key beneficiaries of this burst of creativity and newness in the fashion industry,” Aubin and colleagues wrote in a note Tuesday. Shares of Kering and LVMH rose as much as 7.4 percent and 3.7 percent, respectively.
The sense of optimism follows two years of struggles for the industry, which was weighed down by subdued sentiment among Chinese consumers and fallout from US tariffs. Kering shares in particular have surged in recent months, locking in their best-ever quarter, as investors rewarded the firm following the arrival of chief executive officer Luca de Meo from Renault SA.
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Now, the two companies are poised to benefit from “the fact that the ‘fashion pendulum’ seems to have started to swing back away from understated, minimalist looks towards more colors and a maximalist aesthetic,” the analysts wrote.
That may come at the expense of competitors Hermes International SCA and Prada SpA, said the analysts, who downgraded the firms to equal-weight, expecting them to “benefit less — or even be potentially negatively impacted by an intensification of the competitive landscape.”
The industry still faces a number of risks, according to the Morgan Stanley analysts, including stagnating demand among middle-income consumers and currency trends such as the strong euro.
“This is no longer a sector where, if you’re positive, you buy anything and if you’re negative, you sell anything. You have to be very selective,” UBS analyst Zuzanna Pusz told journalists on a call Tuesday.
By Levin Stamm
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