Lvmh: Prada, LVMH, Hermès… These luxury groups are doing the best in the stock market

(BFM Bourse) – LVMH, Kering, Hermès or Moncler, the giants of European luxury announced this week extraordinary half-year results marked by sales and profits of about 20 to 30%. Despite the price increase, the demand for luxury goods remains intact, with loyal clients unaffected by inflation and the worsening economic environment.

The big luxury groups continue their rise, making for the slowdown in sales in China with the rise in Europe and the United States, in a sector where they have been able to raise prices without losing their customers, which cannot be overcome by the uncertain global economic situation.

LVMH, Kering, Hermès, L’Oréal, Prada, Moncler: the luxury groups announced extraordinary half-year results this week, with global sales rising by 20 to 30% and profits in the same vein . “The demand is there”, explained AFP Arnaud Cadart, portfolio manager of Flornoy.

Stronger growth for saddler Hermès

The luxury group Hermès announced on Friday a profit of 1.64 billion euros in the first half, up 39.7% year on year thanks to increased sales in all regions. Sales of the saddler-leather goods maker amounted to 5.475 billion euros, up 29% compared to the first half of 2021, according to a press release. The current operating margin is 42.1%, “the highest level in history”, according to group manager Axel Dumas.

For its part, Kering welcomed on Thursday “excellent performance” in the first half, posting a net profit of almost two billion, which is 34% a year, thanks to the increase in sales of Europe and the United States. China. The sales of the group led by François-Henri Pinault totaled between January and June 9.93 billion euros, up 23% over the course of a year. Kering’s current operating profit amounted to 2.82 billion and its current operating margin is 28.4% (compared to 27.8% in 2021).

The number one luxury LVMH for its part posted a profit of 6.5 billion in the first half, a jump of 23% in a year. The results increased even more compared to the same period in 2021, the performance that has already been described as “record” of the group.

Sales of Bernard Arnault’s group, the first fortune of France according to the magazine Challenges and second in the world according to Forbes, stood between January and June at 36.7 billion euros (+28%). The group with “75 houses” is led by its main division, Fashion and Leather Goods, which alone generated 18 billion euros in sales (+31%). If the group does not detail the financial performance of its brands, it ensures that “Louis Vuitton, Christian Dior, Fendi, Celine, Loro Piana and Loewe have gained market share everywhere and reached record levels of profit”.

A luxury client that is less sensitive to inflation

In contrast to the big retailers, the luxury clients are made up of wealthy people, “the CSP +”, categories that are “richer less sensitive to inflation, the risk of recession and fears linked to slowdown in the labor market”, according to him.

Geographically, “all markets are there, except for China which is relatively low”, according to the analyst. The groups confirmed: luxury saw an increase in its sales in the United States, Japan and Europe, compensating for a slower pace in China due to restrictions to fight against Covid-19 in the second quarter.

Sales of Prada jumped 89% in Europe and 42% for Moncler thanks to the return of tourists, especially Americans who benefited from a strong dollar against the euro.

“In Europe, we now have a quadrupling of American sales compared to last year and we will surpass 2019”, confirmed Jean-Marc Duplaix, financial director of Kering (Gucci, Yves Saint Laurent, Balenciaga…) during a conference call with reporters.

The increase in the value of the dollar against the euro is a benefit for the luxury industry, which is mainly in Europe (in euros), especially in France and Italy, but which is sold all over the world (in dollars).

“Minor adjustments” to prices

“We estimate that on average the euro zone represents (only) around 15% of the total turnover of European luxury companies”, estimates an HSBC note in mid-July. The sector thus benefits from “strong exchange support thanks to the depreciation of the euro”.

The number one in the world of luxury LVMH saw its turnover taken by 28% in the first half compared to the same period in 2021, thus crossing 36.7 billion euros in the period from January to June. A quarter of this increase is due to the effect of the exchange rate, according to the group. Faced with rising costs of raw materials and transportation, the sector can also afford to raise its prices.

“At the moment, customers are not sensitive to this increase. Sales in France increased by 41%, a record”, underlined Pierre Michaud, manager of Monocle, referring to the situation of customers of the Hermès group .

At LVMH, owner of Louis Vuitton, Dior, Tiffany, and others, “most brands have increased their prices (…) by 3% to 7%”, explained the financial director Jean- Jacques Guiony, “most of the first trimester” . “When there’s a recession, we adjust, and we adapt,” he explained.

Cost increases

In the same vein, a “small adjustment, between 3 and 5%” was made by Hermès “in jewelry and watches” to take into account the “very strong increase in the price of gold and certain metals” , manager Axel Dumas explained during a conference call with reporters. Pierre Michaud, of Monocle, told AFP that at the saddler-leather maker, “the increase in prices is more than the increase in costs”.

Despite the uncertain future of the global economy, major luxury groups say they are confident. Kering even announced in June that it wants to double its sales of Yves Saint Laurent in the medium term to reach 5 billion euros per year and multiply by 1.5 of the main brand Gucci to reach 15 billion euros.

At the same time, Ferrari said it aims for sales of up to 6.7 billion euros by 2026, which is a jump of almost 40% compared to the expected revenue of 4.8 billion euros.

Prada topped the stock market

Despite these good results and the rebounds of recent days, the luxury group has suffered in the stock market since the beginning of the year, although Prada is doing the best.

Here is the performance of the major luxury listed groups since January:

  • -Prada: -6.1%
  • – LVMH: -7.7%
  • – Hermes: -13.5%
  • – L’Oreal: -13.6%
  • – Richemont: -16.9%
  • -Kering: -21.3%
  • – Moncler: -24.3%

(With AFP)

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