The entire fashion sector is in great shape this morning starting from lvmh which in truth last night published weaker than expected data. Instead Adidas surprised positively by raising estimates. Hopes are pinned on the recovery of the Chinese shopping after this week's data.
A Business Square they all improve, starting from Moncler which rises by 2,16%, followed by Brunello Cucinelli +1,87% and Salvatore Ferragamo +1,53%. In Paris, LVMH was up 4,71% at the end of the morning and is also rising Hermes, while Kering +0,19% beats the slack. In Frankfurt Adidas jumps by +9,3%, also dragging Hugo Boss + 1,94 %
LVMH slows down in the first quarter of 2024 (-2%). Wines weigh at -16% while Sephora runs (+3%)
Today's session in the world of luxury opened with data from lvmh which in truth were not exciting. The French giant of Bernard Arnault closed the January-March 20,7 period with 2024 billion in revenues, down by 2% compared to the same period in 2023. Investors, however, focused on organic growth who instead saw one growth of 3%. The company then underlined that the start of the year was favourable, despite the uncertain geopolitical and economic context, with Europe and the United States recording growth considering constant exchange rates and consolidation area and Japan boasting a double-digit growth, while the rest of Asia reflects strong growth in consumer spending Chinese customers in Europe and Japan".
The lion's share is always the Fashion & Leather Goods division, which saw an organic growth in turnover of 2% to 10,49 billion euros (-2% actual change). What penalized the accounts was above all the double-digit decline in prices champagne and cognac, with a turnover down 16%, or 12% organically, to 1,4 billion. During the conference call, LVMH managers were especially cautious about the performance of the Wines and Spirits division, even though retailers' stocks are now so low that an improvement in the business should be very likely in the coming months. Instead it had a good performance there Sephora cosmetics (+3%) with the management which, moreover, has indicated that it is also confident for the next quarters.
Analysts remain positive
For the whole of 2024 the consensus identifies one growth around 7%, with the Fashion & Leather Goods division up by approximately 6%. The analysts of Equity they estimate the 2024 turnover at 91,4 billion, up around 6% and a net profit that should go from 15,159 billion to 16,5 billion, the latter level above the consensus of 1%. The SIM's experts point out that after the recent correction (-9% in the last month), the stock trades with a 2024 price-earnings ratio of around 23 times, in line with the sector median and below the historical average around 26,5 times in the last 5 years. “We do not see events that will catalyze attention in this quarter, but we remain positive given the valuations below historical averages and the expectations of progressive acceleration in the coming quarters”, they explained, thus confirming the 'Buy' recommendation and raising the target of price at 870 euros from the previous 865 euros.
Adidas surprisingly raised its estimates for the end of the year (700 million operating profit from the previous indication of 500 million), after having published a better than expected quarterly result (+4% in revenues to 5,46 billion euros, 336 million per net profit from 60 million last year).
The tip of the balance will be China
The attention of all luxury companies is for Chinese customers who are struggling to emerge from the pandemic period. This week, macroeconomic data pointed to a China stronger than expected. The Chinese government has announced that the GDP in the first quarter of 2024 it grew at an annual rate of 5,3%, beating forecasts of 5,0% and after a +5,2% in the previous period. It was the strongest annual expansion in three quarters, boosted by Beijing's support measures, while the Lunar New Year festival helped revive consumer spending. The government has set a GDP growth target of around 5% this year.
A barrage of “branded” data arriving
China has therefore become the tipping point of the sector. Data is scheduled for the next few days Kering, Prada, Hermès and again, later, Burberry and Richemont. What investors outline is a scenario in which the former Celestial Empire suffers from the unflattering comparison with last year, says Reuters, when the definitive removal of pandemic limitations had given a non-negligible boost to the country's consumption.
A first signal came from the number two in the world of luxury Kering, which last month he anticipated that first quarter revenues will contract by 10% due to a 20% drop in sales of its flagship brand, Gucci, which is being affected by the negative performance in the Asia Pacific area. A decline above the -3% previously estimated by analysts.
The latest 'China Luxury Report' drawn up by Bain & Company hailed 2024 as a year of limited growth for Chinese luxury. Specifically, it would be a mid-single digit advancement, according to which in 2023 the luxury market had progressed in the country by 12 percent. A growth rate driven by a first half of strong momentum but also by an inevitably rewarding comparison with 2022 still overshadowed by the consequences of Covid.
