The luxury sector has put in one of the best stock market performances so far in 2023. LVMH, Hermès and Moncler have all gained around 30% since the start of the year and are nearing their all-time highs. LVMH also became the first European company to surpass USD 500 billion in market value.
The sector has been making the most of China’s reopening. Luxury goods companies were eager to get back to their Chinese customers after two years of pandemic-related lockdowns. Moncler, for example, is very well positioned: it draws 20% of its business from the Greater China region and enjoys strong brand recognition across Asia Pacific markets. What’s more, its low exposure to the US market, which had weighed on the company’s growth in recent years, should now become a good thing as US demand slows.
The luxury sector’s Q1 results have far exceeded analysts’ expectations. But we think the sector’s market trend may have got ahead of itself, with investors becoming overly optimistic in the short term. Moncler, for instance, published excellent Q1 results, but a 23% increase in sales was not enough to keep investors happy. We therefore think it makes sense to wait a while longer before taking new positions in the sector, whose fundamentals remain positive over the longer term.
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