The film “House of Gucci” is in the cinemas. Most of the reviews and visitors are delighted. The film, directed by Ridley Scott, grossed $ 21.8 million in its first five days, including $ 14.2 million on Thanksgiving weekend – both record numbers for pandemic-era adult drama. Analysts say that thanks to Lady Gaga it has also managed to attract a younger audience.
Unlike the audience, the Gucci family is not at all enthusiastic about the film; they want to sue the filmmakers. The Guccis not only think that the story is not accurate, but also that the actors are ugly.
Kering is comparatively cheap
For investors, however, this is irrelevant, because the family actually has nothing to do with the company: Gucci has long been part of the French Kering group. It’s listed on the stock exchange, and Gucci is the winning machine that makes three-quarters of Kering’s total profits.
However, Gucci’s sales growth recently lagged behind other French luxury goods companies such as LVMH and Hèrmes. In the third quarter, Gucci only grew by 3.8 percent, significantly more slowly than the entire Kering group: The company was able to increase sales by 12.2 percent.
The film comes in handy here. It attracts a lot of attention and also determines new customers in the shops. That could boost sales as well as the share. Since the start of the film on November 24th, the Kering share has not really risen.
It would be favorably valued if the film were to increase sales growth to the level of the other French luxury goods companies. It would be possible to triple the share price until the share valuation of Kering, Gucci’s parent company, is on the same level as Hèrmes: While Hèrmes has a price-earnings ratio (P / E) of 75, it is only 26 for Kering. Kering also has some catching-up potential compared to LVMH, as LVMH has a PER of 37.
The China question
So Kering stock could well be worth a bet. However, the question still remains, how will the film “House of Gucci” be received in China? Many luxury goods companies now make half of their sales there. And even more than half of the growth in sales mostly comes from the giant yellow empire.
This article first appeared in the digital offer of «Trade newspaper” under the title: “‘House of Gucci ‘: How Investors Might Benefit».
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