Is Gucci poised for a grand resurgence? The luxury fashion world is buzzing with anticipation as the highly awaited debut runway show from Demna for Gucci draws near. This pivotal moment could signal a significant turnaround for Kering's flagship brand, which currently represents a substantial 39 percent of the group's total sales. The air is thick with optimism, and analysts are starting to revise their predictions upwards.
TD Cowen has recently boosted its financial forecasts for the iconic Italian house. They now project a 2 percent growth in the first half of 2026, with an even more robust 6 percent expected in the latter half of the year. This positive outlook is attributed to the anticipated wave of newness that is expected to permeate the brand throughout the year. As Oliver Chen from TD Cowen put it, "We believe Gucci is back on the radar." He further elaborated that the observed sequential improvement and a stabilization in North America are particularly encouraging signs.
This optimism comes on the heels of Kering's recent financial report. While the group's fourth-quarter revenues saw a 9 percent dip at reported exchange rates, reaching 3.91 billion euros, this figure actually represented a smaller decline of 3 percent in comparable terms, thereby exceeding market expectations. Gucci itself demonstrated a sequential improvement, with its organic revenue decline of 10 percent being slightly better than the 11 percent decrease that analysts had predicted.
TD Cowen's confidence is largely pinned on Demna's strategy for a rapid rollout cadence of new products and the development of broader collections as the year progresses. Chen highlighted Kering's agility in brand and product innovation, which he believes consistently reinforces the fashion heritage of each of its luxury houses. However, he also sounded a note of caution, pointing out that traffic in Gucci stores remains weak and that the impact of newness is still in its nascent stages. While the management overhaul and creative reset are seen as positive steps, the execution risk is high given the scale of the operation.
Currently, TD Cowen maintains a 'hold' rating on Kering stock. The stock experienced a 2.5 percent dip in midmorning trading on Wednesday, following an 11 percent surge on Tuesday.
But here's where it gets even more interesting... Barclays is taking a particularly bullish stance on Gucci's future, especially concerning a potential mega fragrance franchise. They are highly optimistic about the brand's new beauty licensee, L'Oréal, which is expected to take the reins by 2028 at the latest. Considering L'Oréal's remarkable track record of multiplying revenues for brands like Yves Saint Laurent and CeraVe by tenfold, Barclays estimates that a Gucci fragrance business reaching 5 billion euros is well within the realm of possibility. Currently, under the existing licensee Coty, Gucci fragrance sales are estimated to be around 500 million euros.
And this is the part most people miss... Barclays' report emphasizes L'Oréal's proven ability to successfully integrate acquisitions and elevate brands into global powerhouses, having completed over 70 acquisitions in the last two decades. They cite the example of Prada Fragrances, which L'Oréal managed to scale five times in just four years, surpassing 500 million euros in revenues by the end of 2024. Analyst Warren Ackerman noted that L'Oréal is scaling Prada much faster than YSL initially, suggesting they've learned valuable lessons and can accelerate growth more efficiently, avoiding pitfalls and minimizing risks. While this doesn't guarantee Gucci's success, it significantly boosts confidence in L'Oréal's capacity to deliver a step change in Gucci's performance.
Meanwhile, Bernstein maintains an 'underperform' rating. Analyst Luca Solca is adopting a cautious, 'wait-and-see' approach, viewing Demna's fall 2026 runway show as a 'first acid test'. He believes a positive reception from industry buyers and influencers would be a catalyst for a more favorable outlook on the stock. Bernstein has also lowered its 2026 organic growth forecast for Gucci to 4.4 percent from 5 percent, anticipating a decline in wholesale growth.
So, what do you think? Is Demna's vision enough to reignite Gucci's glory, or are the challenges too significant? And can L'Oréal truly transform Gucci's fragrance business into a multi-billion euro empire? Let us know your thoughts in the comments below!
