European luxury takes a breather on the stock market this Thursday after a complicated 2024 for the sector and a start to 2025 marked by pessimism due to the expected low demand from China given the slackness of domestic consumption in the second largest economic power on the planet. LVHM, Kering and Hugo Boss recover part of the ground lost in recent months boosted by the quarterly results of the Swiss group Richemont listed in Zurich with increases of more than, in some moments, 18%.
The owner of Cartier, Ralph Lauren and Chloé, among other brands, registered a record turnover of 6.15 billion euros in the last quarter and a “very solid” year-end with a sales increase of more than 10%. The Swiss group highlighted in a statement this Thursday the double-digit growth confirmed in Europe, America, the Middle East and Africa and Japan with which they manage to counteract the low demand from the Asia-Pacific region as a result of the decline in domestic consumption in the largest market in the area, China, where the company’s situation continues to be “challenging”, as they have admitted.
Based on its accounts, the Stoxx Luxury 10 – the European luxury sector index – is on track to register the biggest intraday rise since May 2022 with a rebound of more than 7% to around 3,900 points.
After the mid-market session in Europe, the shares of the French group LVHM have appreciated by over 8.8% while those of the house that owns Gucci, Kering, have done the same by 8.7%. For its part, Hermés has gained 5.7%. At the same time, in Italy the increase has been more than 9% for Moncler and Burberry in the United Kingdom has recovered more than 8%.
Meanwhile, on the Madrid stock exchange, the Catalan Puig – whose portfolio includes, among other brands, the brands of Paco Rabanne, Carolina Herrera, Charlotte Tilbury and Jean Paul Gaultier – has recovered the 18 euros – after a revaluation of more than 3% – which it lost last Thursday in the heat of the hope of the sector encouraged by a possible recovery in sales volumes over the coming months. For the Spanish company, the analyst consensus collected by FactSet gives the stock a potential of almost 40% to 24.6 euros by title. Likewise, the recommendation on the company is ‘buy’, according to the algorithm it uses elEconomista.es with data from FactSet.
At the same time, in the United States the sectoral index prepared by Goldman Sachs has risen 12% since mid-November amid rumors that the Chinese Government’s economic stimulus plan will cause an increase in spending and that the arrival of Donald Trump to The White House will lead the United States to boost its economic growth.
Even so, for JP Morgan analysts, Richemont’s improvement is due to specific issues of the company and its brands, rather than reflecting an improvement in the sector as a whole. “It could also be a combination of both,” they conclude.
Slowdown until 2027
In the last five years, the luxury industry has gone through a boom time after registering unprecedented demand for luxury personal items – leather, watches, jewelry, fashion… – which has allowed the sector to achieve a 5% compound annual growth rate.
In this period, the pace of growth of the industry has been notable thanks to the fact that ‘megabrands’ – as defined in a recent McKinsey report as companies in the sector with annual revenues exceeding €5 billion – have used their scale to boost visibility and customer appeal. Thus, price increases have represented more than 80% of the growth of the last five years, while the increase in volumes has remained stable.
However, now several of the industry’s tractor engines have seized. Luxury inflation has peaked and current ‘tickets’ are negatively affecting demand. Additionally, the headwinds in China, one of the greatest vectors of growth so far – demand increased by 18% between 2019 and 2023 – threaten to cause a storm for the sector that, according to the latest estimates, could keep your slowdown with pyrrhic growth of between 1% and 3% until at least 2027.
“The rapid expansion of the sector over the past five years has led to overexposure and weakened the industry’s promise of exclusivity, creativity and craftsmanship,” McKinsey economists allege.
The dynamism that emerging markets such as Asia and the Middle East have shown until now will not compensate, says the consultancy, for the single-digit growth estimated in the main Western countries on which the sector relies, with the United States and Europe at the forefront. , but also adding the situation in China.
The brands that have grown the most in recent years are now seeing pressure increasing from customers who question the promise of luxury and personalized experiences that were offered until now, while demanding greater innovation in their portfolios.
#European #luxury #regains #pageantry #stock #market #owner #Cartier