LVMH’s Strong Performance Expected to Revitalize the Ailing Luxury Industry, According to JP Morgan

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Following the pandemic, luxury goods stocks, including those of industry giants like Kering and Burberry, witnessed a significant upswing. Bernard Arnault, the head of Louis Vuitton Moet Hennessy (LVMH), even briefly claimed the title of the world’s richest person. However, this trend has shifted recently.

Luxury Market Facing Challenges

The luxury market is now encountering challenges, with certain luxury stocks plummeting by as much as 25%. This decline serves as a clear indicator that the boom in high-end goods, particularly in fashion and jewelry, is coming to an end. Analysts from JP Morgan predict a slowdown in luxury trends for Q3, attributing it to tough year-on-year comparisons, volatile economic conditions, and the normalization of domestic demand.

Impact on Luxury Giants

JP Morgan

Photo: Yves Herman

LVMH, a key player in the luxury sector, is set to report its Q3 results. Investors and analysts are keen to gauge how economic conditions and demand, particularly in China where sales are faltering, will influence outlooks for Q4 and 2024. While investor sentiment is already fragile, a better-than-expected performance by LVMH could provide some temporary relief to the broader luxury industry. However, the positive impact may be most significant for companies like Richemont, owner of Cartier and Piaget, Moncler, and Hermes, known for the iconic Birkin bag. On the other hand, Burberry, Kering (owner of Balenciaga), and Ferragamo may not experience the same benefits, as they are still in the early stages of repositioning and show no significant signs of improvement. Caution remains high, as the sector’s short-term bounce could be short-lived without positive changes, particularly in the Chinese market. Despite challenges, shares in LVMH have shown a modest 2% increase, opening at around €723 in Paris.

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