(Finance) – S&P Global Ratings has lowered the rating of the French luxury giant Kering to “A-/A-2” from “A/A-1”. At the basis of the judgment there are mainly two events that occurred in recent weeks.
On April 4, 2024, Kering announced that it had acquired a property in Milan for 1.3 billion eurosin line with its strategy to secure key iconic locations for its brands, such as the recent acquisition of strategic properties in New York City in January 2024 and Paris in 2023.
Additionally, Kering provided some preliminary information on first quarter resultsto be published on April 23, 2024, in which the group estimates that revenues for the first quarter decreased by approximately 10% year-on-year, mainly because revenues declined significantly for the Gucci brand, with sales expected in decline of almost 20% compared to the first quarter of 2023.
S&P therefore revised the baseline scenario mainly to take into account a some additional pressure on Kering’s operational performance and to take into account the additional discretionary expenses after the acquisition in Milan, and now estimates that the debt/EBITDA ratio will remain above 2x over the forecast horizon to 2025.
L’stable outlook reflects the expectation that operating performance should improve gradually through the Gucci brand turnaround strategy, with free operating cash flow (FOCF) generation remaining above €3 billion in 2024 and 2025 and slightly higher debt/EBITDA 2.5x at the end of 2024 before improving to 2.2x-2.4x in 2025.