MILANO – The season of first quarter results for luxury companies could provide some disappointment and an excuse to stop and take a breath. The high-end goods sector had a good start to the year (+13%), despite the slowdown generally experienced by all companies in the fourth quarter. Therefore the UBS experts estimate that first quarter earnings they will record on average one growth of +2% (below Bain-Altagamma’s expectations which see growth of 6-8% for the whole of 2024) which, given the limited visibility on sales in the second half of the year, could trigger a wave of realizations.
Consumers want more jewelry and fewer bags
Consumer tastes also change, with jewelery recording excellent performances at the expense of leather goods. The 2023 trend of strong continues polarization between super luxury brands – favorites by a stable clientele not affected by the economy – with those of the most accessible luxury, who suffer. For all these reasons Ubs recommends focusing on the jewelery giant Richemont and Hermèswhich however should record better than average results, and continue to avoid stocks like Salvatore Ferragamo and Burberrywhich even if they trade at lower valuations, risk underperforming compared to other brands.
Kering makes record shopping in Italy: 1.3 billion for a building in Monte Napoleone
edited by the Economics editorial team
A slow start to 2024 in China, but better in the USA
That the start of the year would be weak was widely expected, however the announcement of Kering on -20% of revenues expected by Gucciexperienced a shock for the French group but also for all its rivals. UBS expects therefore that the attention of investors focus on any signals between the various brand articles and markets, to better estimate the probability of a rebound in the second half of 2024. For this reason all eyes will be on China, whose potential slowdown as seen in the last quarter of the year and as signaled by Kering, remains the main risk. Same goes for North America, which was weak in 2023, and which could instead reserve positive surprises also for the rally di Wall Streetwhich will increase investors’ desire to reward themselves. Moncler, which recorded stable turnover in the US in the fourth quarter, already has having said that the start of 2024 was positivesome brands like Brunello Cucinelli (which trades at a multiple of 55 times the expected profits for 2024) continue to grow in double digits, others like Buberry to suffer double-digit drops in sales.
Kering makes record shopping in Italy: 1.3 billion for a building in Monte Napoleone
edited by the Economics editorial team
More tourism and fewer shopping centers from China
In view of the start of the first quarter accounting season, for UBS the risk of a slowdown in China is the most significant variable, also because aThere are mixed signals. The retail sales of watches and jewellery in Hong Kong, in the latest data from January 24, they were higher than 25% compared to the same period 2023, but still 34% less than the average of the last 5 years. According to data on tax refunds by Planet Tax, the spending by Chinese tourists in Europe in Februaryor (the month of Chinese New Year) jumped by 228% compared to the same period in 2023, but it remains 55% below the same period in 2019, that is, before the pandemic. Finally, looking at the growth volumes in China, retail sales in CrMixc shopping centers rose by +7.6% in both January and February 2024, and expectations are for a March in line. However, CrMixc management records more growth in non-luxury malls than in luxury ones, who instead remain under pressure.
A Luxury also in the evaluations
The luxury goods sector deals at a 72% premium compared to MCI Europei.e. slightly below its historical average of the last 5 years (+79%). With the exception of Hermès (which trades at a multiple of 53 times its expected earnings for 2024), the average multiple of luxury companies has fallen below the levels recorded in the last five years, due to the prospects of a slowdown in the short term and the modest growth expected in earnings per share. They are not missing the exceptions: according to UBS the first quarter revenues of Moncler (+13%), Prada (+14%) and Cucinelli (+15%) and of course Hermès (+12%), are all expected to increase by double digits. However, UBS estimates average revenue growth of 2% in the first quarter (and +1% without considering Hermès), so it is more pessimistic than the consensus of analysts who estimate revenues to increase by 3% (and +2% without Hermès). But the experts of the Swiss investment bank they continue to be optimistic about long-term fundamentals of high-end companies.
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– 2024-04-09 15:56:57
