La China reopens its doors. The luxury, who was already in good health, took off. And so, despite the warnings of the surly bankers of the North, first of all the German Joachim Nagel who anticipates the need to more rate hikes after +0,50% in March, both la Milan Stock Exchange that the Paris Stock Exchange celebrate the eternal springtime of the sector: in the French capital the titles of the big three shine brightly during the days of the fashion shows: Lvmh +1,8% ahead of Kering +1,7% and Hermès +1,3%, Ferragamo runs in Piazza Affari, Tod's and Brunello Cucinelli.
Moncler in the spotlight at Piazza Affari
But the Oscar of the day is up to Moncler, born French then revitalized by the care of Remo Ruffini who transformed a sports brand into a trendy label at all latitudes. After a sprint start Moncler +5,5% at the end of the morning the title remains leader of Piazza Affari as well as the brightest in the luxury sector in Europe. Merit of the 2022 results better than expected, but even more positive indications on January-February trends, especially with regard to Chinese customers. But how founded is this optimism?
The awakening of China: Pictet report sees multiples on the rise
Let's start with China which is waking up after the long hibernation caused by the pandemic. In the last five years, "40% of the sales of luxury goods was tied to China, which however in 2022 recorded a slowdown in sales of 15% (against an annual growth which generally stood at 10% %)”, according to one Pictet report signed by Caroline Reyl, Premium Brands fund manager. It is probable that the buying trend will restart stronger than ever. The lockdowns have favored a growth in Chinese household savings to 20% of GDP. According to Reyl, this huge amount of money should flow into new purchases, once the activities reopen.
But it's not just China. The US market, which drove the industry last year, is still robust. Instead, Europe should benefit from the recovery of Asian tourist flows. And good surprises could come from the Emerging Countries, from Brazil to India to the newly rich class of the African continent.
Luxury resists the economic situation better
In general, Luxury resisted the difficult macroeconomic situation thanks to the lesser sensitivity of buyers to inflation, greater price governance and new online sales strategies. Not surprisingly since the beginning of the year the luxury sector advances by 16% against 8,70% of the Stoxx 600 index.
Hence the estimate of a possible increase in sector multiples. The price/earnings ratio is above the historical average (23 times against 21) but lower than those recorded before the pandemic (25 times) and this helps to make companies in the sector attractive. With one caveat: the challenge between brands is particularly competitive. And not everyone is destined to win.
