Luxury goods had a good run after the pandemic, lifting stocks like Gucci owner Kering and Burberry Group PLC (LSE:BRBY) as well as helping Bernard Arnault, the founder and boss of Louis Vuitton Moet Hennessy (EPA:MC), become the world’s richest man for five months.
Elon Musk has now reclaimed his throne and some luxury stocks have lost up to a quarter of their value – a clear signifier that the boom of high-end goods, particularly for clothing and jewellery, is ending.
“As largely anticipated, Q3 will confirm a slowdown of luxury trends year-on-year, due to tough comparatives, volatile macro conditions and the normalisation of domestic demand,” analysts at JP Morgan said.
LVMH, which reports third-quarter results after trading closes on Tuesday, is often a strong benchmark for the rest of the industry and JPMorgan Chase & Co (NYSE:JPM) is keen to see how trends involving economic conditions and demand, particularly in China as sales in the country begin to falter, affect outlooks for the fourth quarter and 2024.
Investor sentiment is already quite weak, the world’s largest bank added, and with shares in LVMH continuing to tumble – down around 17% since June – any better-than-expected indications “could provide some short-term relief to the broader space.”
However, any positive boosts from the Givenchy and Fendi owner may only be most relevant to Richemont, owner of Cartier and Piaget, Moncler and Hermes, creator of the Birkin bag.
JPMorgan claims, Burberry, Balenciaga owner Kering and Ferragamo can’t reap the same rewards, noting how they are all “in the early days of their repositioning journeys, showing no major signs of positive inflection.”
“Hence, we remain relatively more cautious on these names despite the recent corrections. We are also mindful that, while there could be a sector bounce in the short term, this could still be short-lived if the outlook, notably on the Chinese cluster, and earnings risk do not inflect for now,” the US bank added.
Shares in LVMH are up around 2% on Tuesday, having opened trading in Paris at around €723.