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26 Oct 2022
First thoughts post 3Q and start to 4Q
Kering (KER:EPA), 0 | Kering SA (KER:PAR), 0 | LVMH Moet Hennessy Louis Vuitton (MC:EPA), 0 | LVMH Moet Hennessy Louis Vuitton SE (MC:PAR), 0 | Hermes International SCA (RMS:EPA), 0 | Hermes International SCA (RMS:PAR), 0 | Swatch Group Ltd. Bearer (UHR:SWX), 0 | Compagnie Financiere Richemont SA (CFR:SWX), 0 | Burberry Group plc (BRBY:LON), 1,158 | HUGO BOSS AG (BOSS:ETR), 0 | PANDORA (PNDORA:CPH), 0 | Pandora A/S (PNDORA:CSE), 0 | Salvatore Ferragamo Italia (SFER:BIT), 0 | Salvatore Ferragamo S.p.A. (SFER:MIL), 0 | Capri Holdings Ltd (CPRI:NYSE), 0 | Capri Holdings Limited (CPRI:NYS), 0 | Brunello Cucinelli (BC:BIT), 0 | Brunello Cucinelli S.p.A. (BC:MIL), 0 | Prada S.p.A. (1913:HKG), 0 | Moncler (MONC:BIT), 0 | Moncler SpA (MONC:MIL), 0 | Watches of Switzerland Group PLC (WOSG:LON), 349
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First thoughts post 3Q and start to 4Q
Kering (KER:EPA), 0 | Kering SA (KER:PAR), 0 | LVMH Moet Hennessy Louis Vuitton (MC:EPA), 0 | LVMH Moet Hennessy Louis Vuitton SE (MC:PAR), 0 | Hermes International SCA (RMS:EPA), 0 | Hermes International SCA (RMS:PAR), 0 | Swatch Group Ltd. Bearer (UHR:SWX), 0 | Compagnie Financiere Richemont SA (CFR:SWX), 0 | Burberry Group plc (BRBY:LON), 1,158 | HUGO BOSS AG (BOSS:ETR), 0 | PANDORA (PNDORA:CPH), 0 | Pandora A/S (PNDORA:CSE), 0 | Salvatore Ferragamo Italia (SFER:BIT), 0 | Salvatore Ferragamo S.p.A. (SFER:MIL), 0 | Capri Holdings Ltd (CPRI:NYSE), 0 | Capri Holdings Limited (CPRI:NYS), 0 | Brunello Cucinelli (BC:BIT), 0 | Brunello Cucinelli S.p.A. (BC:MIL), 0 | Prada S.p.A. (1913:HKG), 0 | Moncler (MONC:BIT), 0 | Moncler SpA (MONC:MIL), 0 | Watches of Switzerland Group PLC (WOSG:LON), 349
- Published:
26 Oct 2022 -
Author:
Grippo Melania MG | Belge Antoine AB | Charchafji Anthony AC -
Pages:
4
Best-in-class luxury brands still beating in 3Q22
In our 3 August report Luxury 2Q22 in 5 bullets, we outlined the upside to 3Q consensus numbers if China improved (due to less Covid restrictions) more than the rest of the world slowed. Halfway through the 3Q earnings season, LVMH, Brunello Cucinelli and Hermes posted meaningful beats vs consensus estimates, which had risen significantly since August. Kering was also a beat at the group level, in spite of Gucci missing. Generally speaking, it is the same old story in Luxury: very good for brands with strong desirability, less good for others. On a 3yr-stack basis vs 2019, in 3Q vs 2Q, most luxury companies saw a slowdown in US sales as a region, but their sales to the US cluster only slightly moderated due to strong sales from US tourists (notably in Europe). In Europe, the combination of strong tourist-related sales and sales to locals only slightly moderating led to solid numbers. Finally, Japan, rest of Asia ex-China and Middle East remained more than robust.
4Q22 starting better than expected
In Sept and Oct so far, we believe mainland China deteriorated vs July-Aug for most players (Golden Week notably was weak) on renewed Covid restrictions and China GDP falling below 4%. However, based on recent management comments and our own industry contacts, it seems the moderation in rest of the world is far less severe than we anticipated in our 13 Sep report 2H22 Deluxe sector outlook, in which we confirmed our scenario of a 9-month soft patch starting in 4Q22 with sector growth slowing to 5% in 4Q22 and 3% in 1H23. The main reason for luxury demand remaining strong outside of China even in Oct is the ongoing macro deterioration not yet impacting high-end employment, which for us matters more than corrections in asset prices or inflation.
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