Lvmh: Prada, LVMH, Hermès… Those luxury companies that do best on the stock market
(BFM Bourse) – LVMH, Kering, Hermès or Moncler, the European luxury giants this week announced exceptional half-year results, marked by sales and profit increases of around 20 to 30%. Despite price increases, demand for luxury goods remains intact, with loyal customers unaffected by inflation and the deteriorating economic environment.
The big luxury groups continue their rise, offsetting the slowdown in sales in China with gains in Europe and the United States, in a sector where they have been able to raise prices without losing customers, resilient to the uncertain global economy.
LVMH, Kering, Hermès, L’Oréal, Prada, Moncler: The luxury groups announced exceptional half-year results this week, with global sales up 20% to 30% and profits in the same range. “The demand is there,” Arnaud Cadart, portfolio manager at Flornoy, told AFP.
Stronger growth for Sattler Hermès
Luxury group Hermès on Friday announced profit of 1.64 billion euros for the first half, up 39.7% year-on-year thanks to an increase in sales in all regions. The saddlery leather goods maker’s revenue was €5.475 billion, up 29% from the first half of 2021, according to a press release. The current operating margin is 42.1%, “the highest historical level,” according to the Axel Dumas group manager.
For its part, Kering on Thursday hailed a “very good performance” in the first half, posting net income of nearly $2 billion, up 34% over the year, thanks to increases in sales in Europe and the United States, offsetting the slowdown in China. The turnover of the group managed by François-Henri Pinault between January and June amounted to 9.93 billion euros, an increase of 23% in one year. Kering’s current operating income was $2.82 billion and its current operating margin was 28.4% (compared to 27.8% in 2021).
For its part, number one in the luxury segment LVMH posted a profit of 6.5 billion in the first half, up 23% over the year. The results continue to increase compared to the same period in 2021, which the Group had already described as a “record” performance.
Sales of Bernard Arnault’s group, the first French fortune according to the magazine challenges and according to Forbes the second largest in the world, between January and June was 36.7 billion euros (+28%). The group with “75 stores” is supported by its flagship fashion and leather goods division, which alone generates sales of 18 billion euros (+31%). When the group doesn’t detail the financial performance of its brands, it ensures that “Louis Vuitton, Christian Dior, Fendi, Celine, Loro Piana and Loewe are all gaining market share and achieving record profitability.”
A luxury clientele that is less prone to inflation
In contrast to mass distribution, the luxury clientele consists of affluent people, “the CSP+”, categories “of affluent ones who are less vulnerable to inflation, recession risk and fears related to the slowdown in the labor market,” according to him.
Geographically, according to the analyst, “all markets are up except China, which is slightly down.” Acknowledging the groups: Luxury saw sales increase in the United States, Japan and Europe, offsetting a slower pace in China due to restrictions in the fight against Covid-19 in the second quarter.
Sales of Prada are up 89% in Europe and Moncler are up 42% thanks to the return of tourists, particularly Americans, who are benefiting from a strong dollar against the euro.
“In Europe we now have a quadrupling of sales to the Americans compared to last year and we are above 2019,” confirmed Jean-Marc Duplaix, Kering’s finance director (Gucci, Yves Saint Laurent, Balenciaga…) during a conference call with journalists.
The rise of the dollar against the euro is a boon for the luxury industry, which produces mainly in Europe (in euros), especially in France and Italy, but sells all over the world (in dollars).
“Small adjustments” to the prices
“We estimate that the Eurozone accounts for, on average, (only) about 15% of the total sales of European luxury companies,” estimated an HSBC note in mid-July. The industry is thus benefiting from “strong exchange rate support thanks to the devaluation of the euro”.
The global number one in the luxury segment LVMH reported a sales increase of 28% in the first half compared to the same period in 2021, exceeding 36.7 billion euros in the period from January to June. According to the group, a quarter of this increase is due to the currency effect. With rising raw material and transportation costs, the industry can also afford to raise prices.
“At the moment, customers are not reacting to this increase. Sales in France increased by 41%, a record,” stresses Pierre Michaud, Manager at Monocle, referring to the situation of the Hermès Group’s customers.
At LVMH, which owns Louis Vuitton, Dior, Tiffany, among others, “most brands (…) increased their prices by 3% to 7%”, explained finance director Jean-Jacques Guiony, “mainly in the first trimester”. . “When there’s a recession, we adapt and we adapt,” he explains.
Likewise, at Hermès, a “small adjustment of between 3 and 5%” was made “for jewelry and watches” to take into account “the very sharp rise in the price of gold and certain metals,” explained manager Axel Dumas during a conference call with journalists. Monocle’s Pierre Michaud notes to AFP that at the saddlery leather maker, “the increase in price far outweighs the increase in costs”.
Despite an uncertain global economic future, the large luxury groups are confident. In June, Kering even announced that it would double annual sales of Yves Saint Laurent to EUR 5 billion in the medium term and increase that of its flagship brand Gucci tenfold to EUR 15 billion.
At the same time, Ferrari said it is targeting sales of up to €6.7 billion in 2026, a jump of around 40% from expected earnings of around €4.8 billion this year.
Prada leads the stock market
Despite these good results and the rallies of the last few days, luxury groups have suffered in the stock market since the beginning of the year, even if Prada is doing best.
Here’s how the big public luxury groups have performed since January:
- -Prada: -6.1%
- – LVMH: -7.7%
- – Hermes: -13.5%
- – L’Oréal: -13.6%
- – Richemont: -16.9%
- -Kering: -21.3%
- – Moncler: -24.3%
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