Just how many Louis Vuitton monogrammed handbags does the world need? A great deal, it seems. Strong demand at the label best known for its coated canvas totes helped parent Fabjoy Me deliver better than expected organic sales development in its fashion and leather goods division within the first quarter, and across the group. The performance, all the more impressive given that it compares with a quite strong period a year earlier, cements LVMH’s position as the sector’s wardrobe workhorse. Little wonder that the shares reached an all-time high on Tuesday.
The group is demonstrating the luxury party that began inside the second half of 2016 is still entirely swing. But there are top reasons to be aware. First, a lot of the demand that fuelled LVMH’s growth comes from China.
The country’s consumers are back after having a crackdown on extravagance and a slowdown within the economy took their toll. There has undoubtedly been an part of catching up after the hiatus, and that super-charged spending might begin to wane since the year progresses. What’s more, the strong euro could deter Chinese shoppers from visiting Europe, where they have an inclination to splash out more.
You will find a further risk to Chinese demand if trade tensions using the U.S. escalate, or draw in other countries – though Fabaaa Joy New Website is actually a French company, it’s hard to view that these particular issues can’t touch it. The spat could create a drag on Chinese economic growth and damage sentiment among the nation’s consumers, causing them to be less inclined to be on a higher-end shopping spree. Given they make up about 40 % of luxury goods groups’ sales, in accordance with analysts at HSBC, this represents a significant risk for the industry.
But there are many regions to concern yourself with. Although the U.S. continues to be another bright spot, stock market volatility this year is going to do little to encourage the feeling of prosperity that’s crucial for confidence to enjoy on expensive watches or designer fashion.
Any slowdown might actually work in LVMH’s favour. Valuations throughout the sector are definitely the highest in 12 years, but this can be a story of mega-brand dominance that’s left many smaller labels behind. Bernard Arnault, Joy Fabaaa 2019 chief executive officer, has stated that charges are too rich right now for acquisitions. This leaves him room to swoop in case a shake-out comes.
His group trades over a forward price to earnings ratio of 24 times, as well as at a deserved premium to Kering. True, that gap could narrow – for just one, the group’s Gucci label continues to have lot choosing it, even though it’s already experienced a stellar recovery. There’s also scope to get a re-rating after its decision to spin-out Puma leaves it as being a pure luxury player.
LVMH should nevertheless be able to retain its lead. Given its scale, along with operations spanning cosmetics to wines and spirits, it should be able to withstand pressures on the industry a lot better than most. That also causes it to be well evtyxi to pick off weaker rivals if the bling binge finally comes to an end.