Kering Shares Climb on Management Shake-up
MILAN — Kering’s shares climbed 7.4 percent on Wednesday as analysts welcomed its management shake-up and amid reports that an activist investor might be circling the luxury group.
After rising 4.29 percent by early afternoon, shares closed up 7.4 percent at 530.40 euros on the Euronext Paris.
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As reported, Gucci president and chief executive officer Marco Bizzarri will exit on Sept. 23, after the brand’s first show by creative director Sabato De Sarno, a former Valentino designer who succeeded Alessandro Michele. Yves Saint Laurent CEO Francesca Bellettini was named Kering deputy CEO in charge of brand development.
All Kering brand CEOs will now report to Bellettini, who is tasked with steering them in their next stages of growth. Jean-François Palus, currently Kering Group managing director, has been appointed president and CEO of Gucci ad interim. He will relinquish his position on the board of directors of Kering and relocate to Milan until a successor for Bizzarri is named.
As such, even though the CEO change may further delay the recovery story of Gucci, we think it at least closes a chapter and will enable the brand to move to the next step of the equity story.
Carole Madjo, Barclays
Jean-Marc Duplaix, chief financial officer since 2012, also has been appointed a Kering deputy CEO, in charge of operations and finance. Former Chanel global CEO Maureen Chiquet will join the Kering board in September.
Kering’s share price increase on Wednesday also was partially driven by a Bloomberg report, quoting sources, that the group was in talks with defense advisers following approaches by activist investors, including Bluebell Capital Partners Ltd. Bluebell last year made a run at Compagnie Financière Richemont SA, seeking for a major shake-up of that luxury group that eventually was soundly defeated. Bluebell reportedly is pushing for a Kering-Richemont merger — although there has been speculation for several years that the two luxury groups were in talks about a deal, which Johann Rupert, Richemont’s chief, has firmly denied.
Kering declined to comment on the Bloomberg report.
As for the Kering reshuffle, Royal Bank of Canada’s Piral Dadhania wrote in a note that, “We believe Kering’s revised organizational structure and change in leadership roles are a welcome step to further align group talent to better serve the needs of its maisons in our view. We believe this reorganization should be well received by the market.”
The bank did not see Bizzarri’s exit as “a big surprise” as it’s been “a topic fairly central to the investor debate for Kering for some time now, and an important step to instil new (albeit transitory) leadership and a fresh perspective at Gucci.”
The appointment of a co-deputy CEO structure “makes a lot of sense to us” in light of the “steady hand” of Duplaix “that has contributed invaluably to the group in recent years in our view” and Bellettini’s promotion was seen as “a welcome step” given her “proven track record in brand development.” Her new role is expected to provide her with even greater knowledge across the board, noted Dadhania.
In its report, Citibank stated that the executive changes were “well-thought and logical, reinforcing decision-making, governance and succession while showing further determination to transform Gucci.”
Upon the announcements a day earlier, François-Henri Pinault, Kering chairman and CEO, said, “We are building a more robust organization to fully capture the growth of the global luxury market.”
Luca Solca at Bernstein attributed the shares’ gain mainly to Bizzarri’s exit. “Speculation abounds as to who will be leading the turnaround now… Saint Laurent’s CEO? Chanel’s ex-CEO?”
He said that “Kering’s leadership changes aim to elevate the operational expertise at group level. … Some investors were counting on him [Bizzarri] to do it again, while others were asking for a leadership change so the news was not completely unexpected.”
Solca believes that what is also “reassuring for investors is that Maureen Chiquet, ex-CEO of Chanel, has been appointed to Kering’s board. She will be instrumental in the elevation strategy of Kering’s brands. All eyes remain on De Sarno’s first fashion show for Gucci in September. The changes increase the risk profile of our OP but we think the risk/reward is still skewed to the upside.”
Carole Madjo at Barclays said Bizzarri’s departure could be seen “as a total surprise considering the challenges faced by the brand. As such, even though the CEO change may further delay the recovery story of Gucci, we think it at least closes a chapter and will enable the brand to move to the next step of the equity story. In our view, this transition phase increases the likelihood of a proper margin reset at Gucci to strengthen the brand for the long term (increase in marketing expenses, higher vertical integration…). As of now, Gucci still expects to deliver flattish margins for FY23 and to return to a margin of 41 percent in the midterm.”
In sync with a rumor that has been circulating for a long time in Milan and that sources reiterated on Wednesday, Bellettini is still considered to be “a good fit” to be Gucci’s CEO, given her success as CEO of Saint Laurent, and her new role as deputy CEO seems to point to an overview of Gucci as well.
In her report, in addition to Bellettini, Madjo also thinks Chiquet could be “a very interesting profile,” and, looking outside Kering, Barclays points to profiles such as Roberto Eggs, as a potential future CEO for Saint Laurent or Gucci depending on how long the transition will be. Eggs is currently Moncler’s chief business strategy and global markets officer. Palus, “whose mission is to strengthen Gucci’s teams and operations, is relocating to Milan, which could indicate that he may hold this position for a decent period of time,” concluded the report.
Kering will release its first half results on July 27 and Barclays expects 4 percent organic growth in the second quarter. The second quarter is expected to be challenging with Gucci posting 5 percent organic growth and Saint Laurent a 7 percent gain, said the bank.
A Milan-based analyst who spoke on condition of anonymity said that Bizzarri’s exit at this moment was unexpected and that Gucci’s “change of strategy was tardy, meaning that it was quite clear earlier on that a change in the master plan was necessary for the brand.”
Speculation about a possible departure of Bizzarri circulated in Milan around the time Michele exited the brand in November. But in January, Pinault told WWD that Bizzarri would stay put, expressing trust in the executive and confidence in the success of the next chapter.
To be sure, sources in Milan said Bizzarri had recently renewed his three-year contract, making his departure now quite sudden.
Bizzarri led a textbook turnaround at the Italian luxury brand. With Michele’s gender-fluid, retro-tinged glamor, the size of Gucci tripled since 2015, reaching sales last year of 9.73 billion euros. The designer left suddenly amid disagreement over the future of the brand, sources said at the time.
Bizzarri was appointed Gucci president and CEO in December 2014, and he promoted Michele to the top creative spot in 2015, with the goal to make Gucci more directional and the brand’s shows must-sees.
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