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Kering (NR/A-) S&P comments

CONSUMER CYCLICALS

Still sees a turnaround coming; just a delay on when from 2H to next year. The leverage spike it's willing to ride is without a outlook change is somewhat surprising. Nevertheless it will leave ratings unch for now. Assumptions;

  • FY24 sales at €18-€18.5b (-5%-8%yoy) and a EBITDA margin of 26%-27% (-600-700bps); both in-line with consensus.
  • Sees a margin recovery to 28%-29% in FY25 on Gucci turnaround - again in-line with consensus.
  • S&P adj. leverage of 3.3x-3.6x to end FY24 (up from 2.2x in 2023 and previous expectation for 2.5x). Sees it falling to 2.4x-2.6x in 2025 on earnings recovery.
  • Notes potential property disposals in next 12-18m (we noted this as well and co continued flagging it as potential in earnings call this quarter).
  • FOCF to remain more firm at €2.3-€2.5b in FY24 (down from €2.9b in FY23).
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