Lvmh and, above all, Kering, have been struggling on the Paris Bourse for several months now, with their performances weighed down by a sluggish Chinese market. Hermès, on the other hand, has retained its desirability with customers and investors alike.
This week, French luxury goods stocks have regained a little color on the Paris Bourse.
Over the past seven days, shares in the world leader in the sector, Lvmh, have risen by 0.97%, Kering by 1.75% and Hermès by 3.97%.
However, the recently published HSBC “Cruel Summer” survey does not augur well for the luxury goods sector in the short term, which has been severely disrupted by the continuing sluggishness of the Chinese market.
A glimmer of hope
Based on the performance of eight of the world’s leading luxury brands (Burberry, Hermès, Kering, LVMH, Richemont, Swatch, Moncler and Prada), the bank’s analysts now expect organic growth of 2.8%, instead of the 5.5% initially forecast.
The authors do, however, offer a glimmer of hope: by 2025, they expect a return to luxury goods growth of around 7%. And this is undoubtedly the longer-term trend on which investors are basing their expectations.
In the meantime, the HSBC report highlights the polarization of the sector between the winners and losers of the current period. For the third quarter of 2024, its authors are betting on sharp declines for Gucci (-18%) and Burberry (-10%), and on the contrary, strong growth for Hermès (+10%) and Prada (+21%).
This polarization is nothing new. Since the beginning of the year, the major players in the luxury goods sector have performed very unevenly. Lvmh and Kering both performed poorly in the first half. The world leader’s sales fell by 1% and its net profit by 14%, while at Kering, sales plummeted by 11% and operating profit by 42%!
Hermès, on the other hand, continued to sparkle in the first six months of the year. Sales surged by 15%, while net income rose by 9% to 2.4 billion euros.
Widespread stock market decline
And yet, over the past six months, none of the three French luxury goods stocks has been spared on the stock market.
Kering ‘s share price has fallen by 37.9% in the last six months, and Lvmh’s by 27.4%. And even Hermès shares are down 17.2%…
But if we take a step back and look at a year ago, Hermès is the only one to save the day, with an increase of 6.2%. By contrast, Lvmh fell by 27.4% and Kering by 49%!
Over five years, on the other hand, Lvmh has progressed by 65.9%. Less thanHermès (+215.5%) but much better than Kering, which is still in the red (-50.3%)!
It’s only by widening the observation spectrum to ten years that Kering finally manages to post an increase (+58.5%), albeit well below that of Lvmh (+363.6%). The decade’s big winner continues to be Hermès (+708.2%).
Kering, the red lantern
Weighed down by its dependence on Gucci, its flagship House and the Group’s main revenue generator, and on China, Kering is the red lantern of luxury goods on the Paris Bourse.
And while Gucci ‘s revival depends on welcoming the collections of its new designer, Sabato de Sarno, who arrives in February 2023 , the Chinese luxury goods market is unlikely to recover any time soon, according to market specialists.
No wonder, then, that the ABC Bourse website recently stressed that “as long as Gucci does not show tangible signs of recovery, the case will be weakened” and advised to be “careful not to over-anticipate the recovery”.
And it’s no coincidence that, like Kering on the Paris stock exchange, Burberry’s performance on the London Stock Exchange has fallen off in recent months. After all, the British fashion house also generates a significant proportion of its sales in China…
Burberry dropped from the FTSE100 index
Burberry has been described by a British journalist as “the big sick man of luxury in Europe, along with, to a lesser extent, Kering”.
As a result, the illustrious House has just been dropped from the FTSE100 index, the London Stock Exchange’s flagship index of its top 100 market capitalizations. It’s the first time this has happened in fifteen years!
Its shares have, admittedly, lost 75% of their value since the record high reached in April 2023.
Hermès, on the other hand , is still very popular on the Paris Bourse.
Antoine Belge and Melania Grippo, analysts at BNP Paribas Exane, recently upgraded the saddler’s rating to the coveted “outperform” category …
Hermès, still highly rated
“Hermès should continue to deliver well above-average growth for an extended period, thanks to the defensive nature and visibility of its business model”, they stressed.
Indeed, the Maison de la rue du Faubourg Saint Honoré has succeeded in retaining its special aura in the luxury sector, with its timeless leather products and, in particular, its bags sold at stratospheric prices. At the beginning of 2024, the saddler had even announced round increases in its labels, of up to 15% for certain items. But this did nothing to melt the waiting lists for certain cult models such as the Kelly or the Birkin. To get the bag of their dreams, some are even prepared to pay more for it…second-hand!
It’s a double win for Hermès: the desirability of its products feeds the desirability of its shares. But its business model is not as easy to copy as a scarf from the famous House.
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Read also > Kering: persistent difficulties at Gucci and a second profit warning for the luxury group
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