With hindsight, Burberry Group PLC (LSE:BRBY) was the easiest trade of the week.
Cartier owner Richemont had already flagged luxury was turning up, especially in the US but such is the market’s downer on Burberry that the read-through was either not made or dismissed.
But the penny clicked after today’s update with Burberry shares up 11% and pulling luxury sector members all over Europe up with them – the barely comparable JD Sports is 3% higher for example and top of the FTSE 100 on the US bounce potential.
Spirits group Diageo is another riser on the US angle to its business.
Europe’s luxury stocks LVMH, Richemont and Kering were leading the CAC higher today and have pushed the Paris index up more than 3% so far this week
While Burberry reported a drop in retail sales of 4%, this was better than the 13% expected by analysts.
As with Cartier, the US led the way, with sales in America up by 4% over the period, led by outerwear and scarves.
Sales fell by 2% in Europe, but this was a big improvement on the prior period when sales fell by 18%, noted Kathleen Brooks, research director at XTB.
Sales in China fell by 9%, again much better than the 28% decline reported in the prior quarter.
LVMH will report earnings next week, and hopes are high for more of the same.
Luxury is Europe’s tech
According to Brooks, a theme is emerging in the European equity market: luxury is Europe’s version of tech.
“The luxury sector is the best-performing sector so far this year since consumer discretionary makes up 16% of the Eurostoxx 50 index.
“When the market’s view on luxury shifts, this can have a big impact on the overall European stock market.
“While luxury is not as big in the European index as tech is in the S&P500, this also reduces the concentration risk in Europe, which is also positive for the Eurostoxx index.”
Shares in Burberry are up 122p at 1,193p.