Yves Saint Laurent Spring 2017


PARIS — Fast-growing Yves Saint Laurent is poised to eclipse sister company Bottega Veneta in profitability as early as 2017.

That’s the prediction of HSBC luxury analysts Antoine Belge and Erwan Rambourg, who raised Kering’s share price target based on that, growing confidence in Gucci’s turnaround under designer Alessandro Michele and chief executive Marco Bizzarri, and a rebound at Puma.

The bank, which upgraded Kering to buy from hold last June, now forecasts the share price to rise to 240 euros from its previous target of 207 euros.

EBIT margins at Bottega Veneta are expected to deteriorate next year, even if the brand resumes sales growth on easier comps and new products. Known for its woven leather bags, Bottega Veneta saw sales drop 10.9 percent in the third quarter as it continued to struggle with slower tourism flows.

By contrast, HSBC expects YSL to log 13 percent organic growth next year and improve EBIT margins by 150 basis points, enabling it to eclipse Bottega in terms of earnings before interest and taxes.

“A disruption at Saint Laurent due to the change in designer cannot be ruled out, but would be minimal in our view,” HSBC said in a report, referring to Anthony Vaccarello, who succeeded Hedi Slimane earlier this year and paraded his first women’s collection during Paris Fashion Week last September.

HSBC also trumpeted the magnitude of Gucci’s turnaround, “enabling the Italian brand to become one of the strongest performers amongst large luxury brands.

“We take comfort in the fact that several new leather goods lines introduced by Alessandro Michele appear to have the potential to become ‘evergreens’ — product lines sold over several years.”

The bank forecasts Gucci to achieve organic sales growth of 10 percent this year, 9 percent in 2017 and 8 percent in 2018.

The brand saw organic revenues in the third quarter increase 17 percent, boosted by the success of signature products like GG Marmont and Dionysus handbags, as reported.

HSBC also lauded Puma’s turnaround and said it “should be able to show better profitability metrics by 2017.”

On currency-adjusted terms, Puma reported sales 10.7 percent in the three months ended Sept. 30. Company net earnings spiked 98 percent to 39.5 million euros, or $44.1 million, almost double that of the equivalent year-ago period.

“On top of being supported by a general industry trend to adopt a healthier way of life — especially in China — we believe Puma has made some progress in terms of products and is starting to get more traction with retailers,” HSBC said in a separate research note Monday.

It takes a contrarian view that Kering could soon sell off Puma, the anchor of its smaller sport-lifestyle pole.

“Many investors seem to have taken the view that such a disposal could happen in 2016. We said it was premature to expect a disposal in 2016 as we believed Puma’s profitability remained too low…for Kering to find a buyer and maximize the selling price,” it said.

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