But confidence in that view is now taking a hit: Attendees at a luxury conference hosted by Morgan Stanley in Paris pointed to a “relatively more subdued” performance in the United States, according to Edouard Aubin, an analyst at the bank. investment. That reflects “the weakness in the aspirational consumer in particular.”
This was offset by more buoyant demand elsewhere, according to Morgan Stanley. “Overall, business feedback has seemed resilient to us and points to a soft landing in the US, largely offset by strength in other markets.”
Both Asia and the United States are important markets for European luxury companies. Asia excluding Japan accounted for 30% of LVMH’s sales in 2022, while the United States 27%, according to the company’s annual report.
Deutsche Bank analysts have also said the US slowdown is now a growing concern. While the rebound in Chinese demand has been one of the main drivers behind the strong sales, investors are likely to be selective from now on, they added.
Even so, luxury stocks have far outperformed this year: LVMH is up 25% and Hermès 34%, both outpacing the 10% rise in the Stoxx Europe 600 Index. Neither LVMH nor Hermès were immediately available to comment on the Paris conference.
“The luxury sector remains a crowded long position for many investors, with the sector’s premium to the market at historically high levels,” Deutsche Bank analyst Matt Garland said in a note. The rally has seen LVMH grow in size, with its market value breaking the $500 billion level last month, becoming the first European company to reach that milestone.
These gains have been offset by a broader economic slowdown, as investors have bet Chinese shoppers will be willing to spend after emerging from one of the world’s strictest lockdowns. Last month, shares of LVMH hit a record after reporting rising sales, while Hermès also saw its quarterly sales rise as Chinese consumers snapped up its expensive scarves and Kelly bags.
However, red flags have emerged: LVMH has signaled that growth is slowing in the US, while British fashion brand Burberry Group has claimed that demand for sneakers and essentials is waning among young Americans. .