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Business of Fashion
44 minutes ago
- Business
- 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.
Reuters
3 hours ago
- Business
- Reuters
LVMH's CEO reveals new Texas factory as group expects 'good outcome' from EU-US tariff talks
PARIS, July 24 - LVMH's ( opens new tab CEO Bernard Arnault plans to open a second factory in Texas; he said on Thursday, while the luxury group is anticipating a "good outcome" soon from trade talks between the U.S. and Europe, his finance chief said. The industry bellwether reported lower than expected quarterly sales on Thursday, with its core fashion and leather division losing further ground as the group struggles to shake off consumer fatigue and reignite demand for luxury goods. Having been overtaken as France's most valuable listed company by rival Hermes earlier this year, Arnault heavily lobbied the European Union to ease tensions with the Trump administration in recent months. 'I'm pushing as much as I can for us to reach an agreement with the Americans," Arnault told the Wall Street Journal in an interview published on Thursday, in which he also announced plans to open a new factory in Texas by 2027. Arnault opened a Louis Vuitton factory in 2019 during Trump's first term. Reuters reported in April the plant was plagued by a host of operational problems following its high-profile inauguration, which at the time was seen as having helped the group avoid tariffs on luxury goods. Arnault, who early in his career worked as a real estate developer in the United States, has known Trump for decades and repeatedly hinted at the prospect of widening the group's U.S. footprint following his re-election. LVMH's sales for the second quarter to the end of June were down 4% to 19.5 billion euros ($22.95 billion), falling short of a consensus forecast for a 3% decline compiled by Visible Alpha, cited by UBS. Sales at the group's fashion and leather division, accounting for the bulk of profits, were down 9%, below expectations for a 6% drop. Chief Financial Officer Cecile Cabanis said on a call she was confident trade talks between the EU and the Trump administration would deliver good news soon. Asked how LVMH would view a potential general tariff rate of 15% anticipated for exports to the United States, Cabanis said that would be an "overall good outcome for the general mood of our clients". With the exception of wines and spirits, some of LVMH's labels still have room to draw on their pricing power to mitigate the tariff impact, she said. ($1 = 0.8498 euros)
Fashion Network
4 hours ago
- Business
- Fashion Network
Hermes heir's ex-adviser dies as $16 billion legal fight endures
The former adviser to an Hermès heir has died as a longstanding mystery over the whereabouts of company shares worth some 14 billion euros (16 billion dollars) remains unsolved. Eric Freymond worked for 24 years as a wealth manager to Hermès descendant Nicolas Puech before their relationship soured, leading to a court case in Geneva. The wealthy octogenarian Puech alleged that Freymond had played a role in the disappearance of some 6 million shares in Hermès International SCA that he had inherited. A decision by an appeals court in Geneva last year found no evidence that Freymond mismanaged Puech's fortune or that the reclusive, fifth-generation heir was duped over an extensive period during which time at least some of the stock was sold. Freymond denied all allegations of wrongdoing. Freymond's lawyer Yannis Sakkas confirmed the death, saying he was 'deeply shocked by the terrible news.' Freymond was 67. The dispute over Puech's stake in Hermes was one of the most enduring mysteries in the fallout from one of France's most high-profile corporate battles. A recent twist came from a lawsuit filed in March in Washington, DC, in which Puech was accused of failing to deliver the 16 billion dollars of Hermes shares as part of a sale agreement. His lawyer said his client was not involved in the deal. More than a decade ago Bernard Arnault, luxury goods rival and founder of conglomerate LVMH, revealed he had stealthily amassed a stake in Hermès. Descendants controlling Hermès came together and successfully fought the unwelcome advance. The fate of Puech's shares was never clarified even after Arnault's 2014 agreement with the Hermès clan to start unwinding his stake. The enigma deepened in 2023, when Puech accused Freymond of mishandling his holdings. The Hermès clan, which counts more than 100 members, is one of Europe's richest families. Should Switzerland-based Puech still hold his stake, he would be the single largest investor in the purveyor of Birkin handbags and colourful silk scarves that was founded in 1837. Freymond was born on June 21, 1958. He studied law at the Université de Genève from 1979 to 1983 before working in banking at Ferrier Lullin & Cie and Vernes Gestion, according to his website. He then created his own company, Semper Gestion in 2001, and later pursued his interest in contemporary art. In 2014, he retired from Semper Gestion and, with his wife, Caroline, opened Espace Muraille, an exhibition space in Geneva dedicated to contemporary art, the website states. According to the Geneva court document, he started working for Puech in 1998 until his mandate was canceled by the heir in 2022.
Fashion Network
4 hours ago
- Business
- Fashion Network
Hermes heir's ex-adviser dies as $16 billion legal fight endures
The former adviser to an Hermès heir has died as a longstanding mystery over the whereabouts of company shares worth some 14 billion euros (16 billion dollars) remains unsolved. Eric Freymond worked for 24 years as a wealth manager to Hermès descendant Nicolas Puech before their relationship soured, leading to a court case in Geneva. The wealthy octogenarian Puech alleged that Freymond had played a role in the disappearance of some 6 million shares in Hermès International SCA that he had inherited. A decision by an appeals court in Geneva last year found no evidence that Freymond mismanaged Puech's fortune or that the reclusive, fifth-generation heir was duped over an extensive period during which time at least some of the stock was sold. Freymond denied all allegations of wrongdoing. Freymond's lawyer Yannis Sakkas confirmed the death, saying he was 'deeply shocked by the terrible news.' Freymond was 67. The dispute over Puech's stake in Hermes was one of the most enduring mysteries in the fallout from one of France's most high-profile corporate battles. A recent twist came from a lawsuit filed in March in Washington, DC, in which Puech was accused of failing to deliver the 16 billion dollars of Hermes shares as part of a sale agreement. His lawyer said his client was not involved in the deal. More than a decade ago Bernard Arnault, luxury goods rival and founder of conglomerate LVMH, revealed he had stealthily amassed a stake in Hermès. Descendants controlling Hermès came together and successfully fought the unwelcome advance. The fate of Puech's shares was never clarified even after Arnault's 2014 agreement with the Hermès clan to start unwinding his stake. The enigma deepened in 2023, when Puech accused Freymond of mishandling his holdings. The Hermès clan, which counts more than 100 members, is one of Europe's richest families. Should Switzerland-based Puech still hold his stake, he would be the single largest investor in the purveyor of Birkin handbags and colourful silk scarves that was founded in 1837. Freymond was born on June 21, 1958. He studied law at the Université de Genève from 1979 to 1983 before working in banking at Ferrier Lullin & Cie and Vernes Gestion, according to his website. He then created his own company, Semper Gestion in 2001, and later pursued his interest in contemporary art. In 2014, he retired from Semper Gestion and, with his wife, Caroline, opened Espace Muraille, an exhibition space in Geneva dedicated to contemporary art, the website states. According to the Geneva court document, he started working for Puech in 1998 until his mandate was canceled by the heir in 2022.
New York Post
9 hours ago
- New York Post
Slain Hamas chief Yahya Sinwar's widow smuggled out of Gaza — and is already remarried: report
The widow of slain Hamas chief Yahya Sinwar, the mastermind of the Oct. 7 terror attacks, was reportedly smuggled out Gaza with their kids using fake passports — and has already remarried. Samar Muhammad Abu Zamar managed to slip out of the Palestinian enclave with huge chunks of cash in the early days of the war, Ynet reported Wednesday, citing multiple sources. The Birkin bag-loving widow fled with the couple's two young sons to Turkey, where she remained in hiding as Israeli forces hunted down her husband, the sources added. Advertisement 5 Widow of Yahya Sinwar was reportedly smuggled out of Gaza and is remarried. IDF 5 Hamas leader Yahya Sinwar's wdow reportedly spotted with $32,000 Birkin bag as she fled Gaza hideout. IDF Then, just months after her husband was wiped out by Israeli forces in a routine ground operation in southern Gaza last October, Abu Zamar quickly remarried. 'She's no longer here — she crossed through the Rafah border using a fake passport,' one source told the outlet, adding that the operation involved 'high-level coordination, logistical support and large sums of money that regular Gazans don't have.' Advertisement Her new marriage and resettlement was orchestrated by Fathi Hammad — a Hamas operative who is renowned for helping terrorists and their families disappear. 5 The front page of the New York Post on October 18, 2024. csuarez Details on her new husband weren't immediately known. It comes after footage emerged late last year of the terror kingpin's wife fleeing into a Gaza tunnel while clutching what Israeli officials claimed was a $32,000 Birkin bag just hours before the Oct. 7 massacre unfolded. Advertisement 5 Footage of Sinwar fleeing with his family the night before the October 7 terror attack. IDF 'Did Sinwar's wife enter the tunnel with him on October 6 carrying a Birkin bag estimated to cost around $32,000?!' an IDF spokesperson wrote on X, alongside a screenshot of the woman holding what appeared to be a super-luxe Hermes bag. 5 Yahya Sinwar, the mastermind behind the October 7 terror attacks, was killed by Israeli forces. SOPA Images/LightRocket via Getty Images Advertisement 'While Gaza residents have no money for food, we see many examples of Yahya Sinwar and his wife's special love for money.' It wasn't clear if that bag was a knock off.
