The strong rise that the shares of the luxury industry have registered this year, driven by international demandhe, in particular of Porcelainsuffered a setback that has lost more than US $ 30,000 million to the sector on Tuesday.
The actions in Hermes International fell to a 5.5%while those of Moët LVMH hennessy Louis Vuitton they fell by around 4% and those of Gucci owner Kering SA by more than 2%.
In the last year, this dynamic sectore has become for the European stock market in what the great technologies are for the American: a set of dominant growth companies that has held up through the ups and downs of the economy.
However, confidence in that view is now taking a hit: attendees at a conference on the luxury sector hosted in Paris by Morgan Stanley pointed to a performance “relatively more moderate” in the United States, according to Edouard Aubin, an analyst at the investment bank. that reflects”weakness in the aspirational consumer in particular”.
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This was offset due to more buoyant demand elsewhere, according to Morgan Stanley. “Overall, we have found business feedback to be resilient, pointing to a soft landing in the US, largely offset by strength in other markets.”
Both Asia and the US are important markets for European luxury companies. Asia excluding Japan, represented 30% of LVMH sales in 2022while the US 27%, according to the company’s annual report.
Deutsche Bank AG analysts have also said the US slowdown is now a growing concern. While the rebound in Chinese demand has been one of the main drivers behind the strong sales, investors are likely to be selective from now on, they added.
Still, luxury stocks have far outperformed this year: LVMH is up 25% and Hermès 34%both outperforming the 10% increase in the index Stoxx Europe 600. Neither LVMH nor Hermès were immediately available to comment on the Paris conference.
“The luxury sector remains a crowded long position for many investors, with the premium of the sector relative to to market at historically high levelsDeutsche Bank analyst Matt Garland said in a note. The rally has seen LVMH increase in size, with its market value surpassing the $500 billion level last monthbecoming the first European company to reach that milestone.
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These gains have been offset by a more general economic slowdown, as investors have bet Chinese shoppers will be willing to spend after emerging from one of the world’s strictest lockdowns. Last month, LVMH shares hit a record high after reporting increased saleswhile Hermes It boosted its quarterly sales as Chinese consumers also bought its expensive scarves and Kelly bags.
However, red flags have emerged: LVMH has signaled that growth is slowing in the US, while British fashion brand Burberry Group Plc has said that demand for sneakers and basics is declining among young Americans.
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