The stock prices of Hermès and LVMH, the parent company of LV, fell sharply, and analysts expect Chanel's operating profit margins to be impacted; as the stock prices of Hermès, LVMH, and Kering Group fell, the European luxury goods industry index saw its biggest decline in a month.
The Zhitong Finance App learned that luxury stock prices in the European stock market were generally hit hard on Wednesday. Earlier, European luxury goods giant Chanel (Chanel) released relatively pessimistic performance prospects. The company warned that the luxury goods industry was “entering a more challenging environment”. Analysts said in this regard, they generally believe that the operating profit margin of Chanel, a top luxury brand, may face increasing pressure. As luxury stock prices such as Hermès, LVMH, and Kering Group plummeted, the European luxury goods industry index saw its biggest decline in a month.
After privately owned Chanel Ltd. (Chanel Ltd.) released the 2023 earnings data, the Euro Stoxx Luxury 10 Index (Euro Stoxx Luxury 10 Index) once fell by as much as 2%, the biggest in about a month. Although the world-renowned high-end luxury handbag, cosmetics, and jewelry brand reported double-digit sales and profit growth, investors' attention was generally focused on the cautious tone of its performance prospects.
Philippe Blondiaux (Philippe Blondiaux), Chanel Global Chief Financial Officer, said: “After three years of extraordinary growth in our industry, we are now entering a more challenging environment.”
Since this year, the price of luxury goods stocks in the European stock market has been fluctuating. The latest disappointing news and recent demand warnings issued by luxury giants such as Kering SA (Kering SA) have made investors worry that even wealthy consumers may think twice before squandering luxury goods. In particular, the rebound in demand in important luxury markets such as North America and Asia has reversed.
Valuation factors also failed to help luxury stocks in the European stock market. The industry's expected price-earnings ratio is far higher than the historical average, and the premium is as high as 100% compared to the European stock market.
Prior to Chanel's cautious outlook, Gucci's parent company and global luxury goods giant Kering SA (Kering SA) warned in an earnings report in late April that due to a sharp decline in sales of Gucci, its largest luxury brand, the group expects a sharp drop of 45% in the first half of this year.
Kering is working to revive the fate of its important brand Gucci, which accounts for more than two-thirds of Kering's overall operating profit. The luxury group appointed Sabato De Sarno (Sabato De Sarno) as Gucci's new creative director last year, and his creative design began entering its stores in February of this year. However, Kering warned in its earnings report that as overall demand in the luxury goods market showed signs of cooling, it would take time for sales to fully recover.
Kering Group's latest financial data also shows that on a comparable basis, Kering Group's sales fell by about 10% in the first quarter, which is basically in line with the warning information issued by the group in March. Comparable sales of Yves Saint Laurent (Yves Saint Laurent), its second-largest luxury brand, fell by about 6%.
Hermès stock prices fell by more than 4% in European stocks on Wednesday. Shares of Kering Group and LVMH, the parent company of LV, both fell by more than 2.5%, and Richemont Group (Richemont) shares fell 2%.
In contrast, the stock price of L'Oreal SA (L'Oreal SA), a well-known European beauty product manufacturer, bucked the trend and rose by about 2%. Chanel (Chanel) said that its products with a relatively high penetration rate, such as perfumes and beauty products, experienced a “very strong growth rate” in all categories. The company stated that this was driven by the continued recovery of European travel retail and a further increase in demand from local customers for some popular beauty products.
Analyst David Da Maia from CIC Market Solutions said that Chanel's operating profit decreased by more than 100 basis points due to a 20% increase in marketing expenses. In a written review, Da Maia said: “The group said that the market environment in 2024 was not very favorable, and unlike previous years, it did not give any signs of performance indicators in recent months, which may indicate that its growth has clearly slowed since the beginning of this year, in line with the luxury industry as a whole.”