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Business of Fashion
3 hours ago
- Business of Fashion
Luxury's Gulf Between Winners and Losers Is Widening
For Europe's luxury stocks, this earnings season will hammer home the widening gulf between the winners and the losers. The industry got off to a promising start with robust earnings from British trenchcoat maker Burberry Group Plc that sent its stock up as much as 9 percent and better-than-expected sales at Cartier owner Richemont. But upcoming reports from LVMH Moët Hennessy Louis Vuitton SE, Kering SA and Salvatore Ferragamo SpA look less promising. If sales at these companies undershoot already weak forecasts, the shares may extend this year's drop that has wiped out market value of as much as €175 billion ($205 billion). While the outlook for luxury shares is crucial for Europe's stalled equity market rally given the weight of these companies, investors have to be more selective about the stocks they pick. This gap has been widening as a web of ailing China demand, varying brand perception, a weaker dollar and high valuations impacts these companies differently. The season will be critical to determining the outperformers and laggards, with analysts expecting very wide revenue growth outcomes. 'It's not going to be one-tide-lifts-all-boats for the sector,' said Stefan-Guenter Bauknecht, a senior portfolio manager at DWS. 'It really depends on the category and how the brand is perceived in the category. And the VIP certainly helps.' One striking example of the sector's divide is LVMH versus French peer Hermès International SCA. Sales at LVMH's key Fashion & Leather Goods division are expected to have dropped 7.8 percent in the second quarter, according to analyst estimates. The company reports after the bell on Thursday. Hermes, which has been an example of how companies can thrive on selling the highest-end items, is expected to report revenue growth of 12 percent at its leather goods division. Its results are due on July 30. In the case of the Louis Vuitton and Tiffany & Co. owner, the stock has lost roughly half of its value over the past two years, losing its crown of Europe's biggest stock, with investors increasingly worried about an unprecedented demand slump in China. Hermes shares, on the other hand, are weathering the broader industry pullback. After a 160 percent jump since the end of 2020, the stock is little changed this year versus a 7 percent drop in Goldman Sachs Group Inc.'s basket of luxury shares. In the current economic context, pricing power is critical, said Helen Jewell, Europe, Middle East and Africa chief investment officer at BlackRock Fundamental Equities. 'The challenge for investors has been some of the names that we thought had greater brand strength, and it turned out they actually didn't,' she said, adding that there could be some buying opportunities after the selloff in the sector 'but you do need to be selective.' For the sector as a whole, the difference is stark between now and the 2021 to 2023 boom times, when investors were rushing to snap up any European luxury shares as they reaped the profits from shoppers on a post-pandemic spending spree. But with China's sluggish economy putting a dent into demand for pricey handbags and watches, investors are buying shares in the brands that can captivate consumers and selling the ones that can't. Among this year's winners, shares in Burberry have surged more than 30 percent. The UK fashion brand is gaining traction with its turnaround plan and winning new customers through its outwear push. To some investors, luxury valuations are still too high overall even after this year's plunge in a number of stocks. The industry has an average forward price-earnings ratio of 27, according to data compiled by Bloomberg. That's a near 85 percent premium to the broader market and above the long-term premium from the past 10 years. 'This is a sector that is fully exposed to tariffs and fully exposed to the weaker dollar,' said Roland Kaloyan, head of European equity strategy at Societe Generale SA. 'It's going to be quite difficult, so I stick to my underweight.' By Sagarika Jaisinghani, Michael Msika, Julien Ponthus Learn more: Opinion: When Will Luxury's Perfect Storm Pass? The luxury sector is probably closer to the end of the storm than the beginning, but many valuations are pricing in the worst, writes Andrea Felsted.
New York Post
3 hours ago
- New York Post
TikTok will go dark in US if China doesn't OK sale before Trump's deadline: Lutnik
Commerce Secretary Howard Lutnick said Thursday that TikTok will have to stop operating in the United States if China does not approve a deal for the sale of the Chinese-owned short video app that is used by some 170 million Americans. Lutnick, speaking on CNBC, also said the US must control the algorithm that makes the social media platform work. Last month, President Trump extended by 90 days to Sept. 17, a deadline for China-based ByteDance to divest the US assets of TikTok. Trump's action took place despite a 2024 law that mandated a sale or shutdown by Jan. 19 of this year if there had not been significant progress. Commerce Secretary Howard Lutnick warned TikTok will go dark in the US if China doesn't approve a sale to American investors. REUTERS 'China can have a little piece or ByteDance, the current owner, can keep a little piece. But basically, Americans will have control. Americans will own the technology, and Americans will control the algorithm,' Lutnick said. 'If that deal gets approved, by the Chinese, then that deal will happen. If they don't approve it, then TikTok is going to go dark, and those decisions are coming very soon.' TikTok did not immediately comment. A deal had been in the works this spring that would spin off TikTok's US operations into a new US-based firm, majority-owned and operated by US investors. This stalled after China indicated it would not approve it following Trump's announcements of steep tariffs on Chinese goods. Trump has three times granted reprieves from federal enforcement of the law that mandated the sale or shutdown of TikTok that was supposed to take effect in January. A deal had been in the works this spring that would spin off TikTok's US operations into a new US-based firm, majority-owned and operated by US investors. REUTERS Attorney General Pam Bondi sent letters to Apple, Google and other companies that provide services or host the TikTok app that were made public this month. The letters said the Justice Department was irrevocably relinquishing any claims against the companies for potential violations of the law, citing Trump's determination that an abrupt shutdown would interfere with his overseeing national security and foreign affairs. Some Democratic lawmakers argue Trump has no legal authority to extend the deadline and suggest the deal under consideration would not meet legal requirements.
Forbes
4 hours ago
- Forbes
LVMH Sales Fall But Luxury Conglomerate Outperforms Luxury Forecasts
Luxury conglomerate LVMH reported a decline in sales for the first half of 2025, as billionaire CEO Bernard Arnault announced plans to open a second factory in Texas amid concerns about how the luxury sector will navigate President Donald Trump's tariffs. CEO of LVMH Holding Company, Antoine Arnault speaks during a meeting after LVMH was named as final ... More premium sponsor of 2024 Paris Olympics, in Paris on July 24, 2023. (Photo by JULIEN DE ROSA / AFP) (Photo by JULIEN DE ROSA/AFP via Getty Images) AFP via Getty Images The luxury conglomerate posted $22.95 billion (€19.5 B) in sales for Q2, in line with analyst expectations. While analysts predicted a 7.02% decline in sales growth, LVMH's second-quarter revenue outperformed expectations, with sales only down 3%. The firm is projected to earn $26.06 billion (€22.15B) this fiscal year. A mild slowdown in sales and uncertainty in Q1 was expected to continue into the second quarter, according to Morningstar equity analyst Jelena Sokolova, 'with no recovery or slowdown for these luxury players.' Cécile Cabanis, the firm's CFO, revealed that the wine and spirits division is experiencing an ongoing restructuring, adding the group does not expect to see significant sales growth in the sector until the second half of 2026. Wine & Spirits and fashion & leather goods divisions both experienced a 7% decline in revenue, due to continued inflation. Cabanis cited Japan's falling tourist economy as one of the main factors in the decline of fashion & leather goods sales. Although LVMH made no direct comment on Trump's tariffs, Cabanis said selective retailing helped maintain the market in the U.S., namely through Sephora. Tangent Loro Piana, which has seen a resurgence in recent years thanks to the 'quiet luxury' trend, was recently put under court administration in Italy for a year because of alleged worker exploitation within its supply chain. According to reports, investigators found workers were forced to work up to 90 hours a week, seven days a week and made less than $5 per hour. Cabanis said Thursday the firm had cut ties with that supplier. LVMH acquired 80% of Loro Piana for $2.57 billion in 2013. LVMH has three factories within the U.S., two in California and one in Texas. Reports say the Texas factory is one of Louis Vuitton's worst performing factories. Donald Trump attended the ribbon cutting for this Texas factory in 2019 with the expectation the factory would create 1,000 jobs over a five year period. However, reports state the headcount could be as low as 300. LVMH received a host of tax breaks from Johnson County, where the Texas factory resides, including a 10-year 75% property tax cut, saving the company an estimated $29 million. Forbes estimates LVMH Chairman and CEO Bernard Arnault and family to be worth $146 billion, making him the richest person in Europe and eighth richest in the world as of Thursday. Key Background The luxury sector faced a slowdown in 2024 due to a loss in consumer confidence caused by economic uncertainty and a shift in spending patterns. However, LVMH still dominated the global luxury market with nearly a quarter of market share last year. Investors were also watching as consumers in Asia have driven sales, boosting it to the top buying market, accounting for 37% of regional revenue in 2024. Moët Hennessy has recently been the weakest performing division within LVMH. It experienced a 36% drop in operational profits in 2024 and sales revenue down 9% in 2025. Alexandre Arnault, Bernard Arnault's son, began heading the division in February 2025 in a bid to target younger consumers, and cut the sector's workforce by 10% this May. His appointment comes after success in rejuvenating Tiffany and Rimowa through high profile celebrity endorsements and collaborations.
