- Despite the global crisis, the luxury brand market has good prospects with a rebound in LVMH shares fueled by positive results in China.
- LVMH is the undisputed leader in the global luxury market.
- The luxury brand sector has recovered from the pandemic, but inflation could be a red flag.
The luxury brand market has very good prospects for the coming years, despite the fact that the inflationary crisis and, now, recessionary, is hitting most of the world’s economies.
One proof is the rebound this Thursday, April 13, in the shares of LVMH, the largest player in the luxury market, based on results in China that are very encouraging.
“In the first quarter of 2023 there was a great recovery in the sale of luxury goods in China, a key market,” he said in a note. Loic MorvanBryan Garnier analyst.
The most obvious proof is the more than 10 percent increase in LVMH’s revenue in the Chinese market, the largest in terms of volume in the world.
This result in the Asian giant made the group’s quarterly revenue grow notably, well above analysts’ forecasts.
“The good thing is that consumer confidence in China is expected to continue to grow, it will be gradual and throughout the year,” added Morvan.
In this framework, most of the rating agencies and investment banks raised the target price of LVMH shares and maintained or changed towards a buy rating.
Luxury brands have a leader
LVMH (Moët Hennessy Louis Vuitton) is a French luxury goods conglomerate that has become the undisputed leader in the global luxury market.
Led by Bernard Arnault (and now with his daughter), LVMH is an octopus with a huge and diverse portfolio of prestigious brands.
LVMH has more than 65 brands covering fashion, leather goods, perfumes, cosmetics, wines and spirits, watches and jewelry, among other luxury categories.
Some of the most recognized brands under the LVMH umbrella obviously include Louis Vuitton, Christian Dior, Givenchy, Fendi, Bulgari, Sephora, Moët & Chandon, Dom Pérignon, Hennessy, and Tag Heuer, among many others.
These brands are known for their exceptional craftsmanship, timeless designs and unparalleled luxury, catering to affluent and discerning consumers.
The Asia-Pacific region, China, particularly, has become a lucrative market for LVMH, thanks to a growing middle class and increasing consumer spending on luxury goods. LVMH has also been expanding its presence in other emerging markets, such as India and, especially, the Middle East.
LVMH’s competition is broad, but very low in terms of sales compared to Arnault’s giant: Kering, Richemont, Estée Lauder and Swatch Group.
Pandemic, recovery and inflation
The luxury brand sector was one of the least hit by the pandemic.
After the months of quarantine, when they did suffer from the closure of the stores, thehe luxury brands recomposed their income and profits thanks to the fact that their consumers are the least affected, in relative terms, by the impact of the problems of the global economy.
However, there is an alarm signal: inflation. As prices rise, customers’ leeway to spend big money, including luxury products, is getting narrower.
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