Kering's Turnaround Gains Momentum: Is the Luxury Giant Undervalued?

Kering, the French luxury conglomerate behind iconic brands like Gucci and Bottega Veneta, has long been a bellwether for the high-end fashion sector. However, the company's recent financial struggles-driven by Gucci's prolonged slump and macroeconomic headwinds-have left its valuation in a precarious position. As of Q3 2025, , , as reported in Kering's third-quarter press release. Yet, beneath the surface, early signs of stabilization and strategic overhauls are emerging. This article evaluates whether Kering's current valuation and forward-looking visibility justify a shift from a neutral to a bullish stance.

A Sequential Recovery, But Challenges Remain

Kering's Q3 2025 results showed a marked improvement compared to Q2, , according to a MarketScreener report. The company attributed the 5% sequential improvement to stronger performance in North America and Western Europe, particularly at Gucci, which saw increased demand for new leather goods, according to an Investing.com article. Meanwhile, , more resilient brands, as noted in the company's press release.

However, the broader context remains challenging. Gucci's struggles-rooted in shifting consumer preferences and inventory overhang-continue to weigh on Kering's top line. The company's decision to sell its beauty division to L'Oréal in 2025, reported by Investing.com, reflects a strategic pivot to focus on core fashion brands, a move that could unlock value but also signals the scale of the turnaround required.

Valuation Metrics: A Premium with Promise

Kering's valuation metrics suggest a stock priced for both caution and optimism. As of the latest data, , according to StockAnalysis statistics, . While this premium might deter some investors, it aligns with the luxury industry's focus on brand equity and long-term cash flow generation. , per StockAnalysis, further highlights Kering's valuation relative to its operating performance, a metric often favored in capital-intensive sectors.

The absence of a PEG ratio-a critical tool for assessing growth-adjusted valuation-remains a limitation, according to StockAnalysis. However, analyst forecasts provide clarity. , based on Simply Wall St forecasts, . These figures suggest that while Kering's valuation is elevated, its growth trajectory could justify the premium.

Analysts' Bullish Case: Turnaround Catalysts and Price Target Hikes

Recent developments have reignited investor confidence. , , according to The Wall Street Journal. This momentum follows the appointment of , a former Renault executive with no prior luxury experience, as CEO. De Meo's strategy-centered on streamlining operations, overhauling Gucci's creative direction, and accelerating -has been met with cautious optimism, per The Wall Street Journal.

Analysts have raised price targets, citing the company's Q3 performance as an early indicator of stabilization. , , was noted in a Business Times report, and has been interpreted as a turning point. With Kering's management forecasting Q4 trends to mirror Q3's modest recovery, the path to a full turnaround appears plausible, albeit gradual.

Risks and the Road Ahead

Despite the positives, risks persist. Kering faces tough comparisons in Q4 2025, and Gucci's recovery is far from guaranteed. The 's sensitivity to global economic cycles also means any macroeconomic downturn could amplify volatility. Additionally, the sale of the beauty division, while necessary, reduces Kering's diversification.

However, the company's balance sheet remains robust, , according to StockAnalysis. These fundamentals, combined with a committed to structural reforms, position Kering to capitalize on its brand portfolio's long-term value.

Conclusion: A Calculated Bull Case

Kering's is undeniably rich, but its forward-looking growth projections and strategic overhauls present a compelling case for a bullish stance. The company's ability to exceed in Q3, coupled with a management team prioritizing efficiency and innovation, suggests that the worst may be behind. While the luxury sector's cyclicality demands caution, , per Simply Wall St, and its recent stock performance indicate that the market is beginning to price in a turnaround. For investors with a medium-term horizon, the current valuation appears justified by the potential for a sustained recovery.