Bernstein'S Latest Luxury Industry Observation: Brand "Polarization" Continues

According to the latest research data from Sanford C. Bernstein, an investment research firm, global luxury companies are facing a bad omen: Chinese consumers may not spend too much money on non essentials.

In the conclusion of the two week China field survey, Luca Solca, a luxury industry analyst at Sanford C. Bernstein, said in a wrap up report: "if there is no further monetary policy intervention in the United States, and the Sino US trade negotiations have not yet made progress, the further reduction of consumer demand in China's wealthier tier may weaken the growth prospects of luxury companies. The leading and the same period indicators show that the discretionary spending of Chinese consumers is decreasing, which indicates that the development of the luxury goods industry may be approaching a short peak.

According to the on-the-spot investigation, Solca said that China's luxury consumption environment will tend to be moderate next year. The negative impact of Hongkong's social turbulence on the industry may continue to be in the first half of 2020.

In addition, Solca also indicated that the polarization trend between the best and worst luxury brands in the industry may continue. LVMH group's Louis Vuitton and Chiristian Dior, Kering (Kai Yun) group Gucci, and Chanel (Chanel) and Hermes (Hermes) and other luxury brands have been leading the way.

　　 Recent performance and stock price performance of major luxury companies

LVMH

Last week, LVMH group climbed to its highest level this year, to 404.55 euros per share, and its current market value is 202 billion 800 million euros. As of last Friday (November 8th) closing, the group's stock price has risen 59% to 403 euros per share this year. The group is also one of the largest companies in the European Storck 600 index for personal and household products this year, up 56%.

Last Monday (November 4th) closed, LVMH shares reached 397.5 euros per share, the total market value broke through the 200 billion euro mark, instead of Pharmaceutical Group Sanofi (Sanofi) and French Petroleum Companies Total (Total) has become the highest market value of French listed companies.

The recent increase in market capitalization of the LVMH group is closely related to its good performance in the third quarter and the recent decision to buy Tiffany& Co, an American luxury jewelry brand.

LVMH group's net sales in the 2019 quarter of fiscal third increased 17% to 13 billion 300 million euros compared with the same period last year, while the mainland China market grew steadily. However, sales in China's Hongkong region fell 25% over the same period.

At the end of October, LVMH group confirmed that it had offered a $120 bid for Tiffany. After that, Tiffany responded that the offer was too low. Recently, there was news that the LVMH group might choose to increase its bid for Tiffany.

Kering

As of Friday's close, Kering (Kai Yun) shares have risen 31% this year to 519.6 euros per share, with a current market value of 65 billion euros.

In the third quarter of fiscal year 2019, the net sales of Kai Yun group increased 14.2% to 3 billion 880 million euros compared with the same period last year. The sales of main brands Gucci (Gucci) and Yves Saint Laurent (Saint Laurent) have achieved 13.3% steady growth, while Bottega Veneta has swept the previous downturn and the net sales increased by 9.8%. Although China's Hongkong region was affected by the social situation, sales fell sharply by 35%, but in other parts of Asia, there was growth.

Burberry

As of Friday's close, Burberry shares have risen 18% this year to 2044 pounds per share, with a current market value of 8 billion 400 million pounds.

In July, the British luxury brand Burberry announced its first quarter sales in the 2019/2020 fiscal year: the five year transformation strategy achieved initial results and sales increased to 498 million.

Herm s

As of Friday's close, Herm's s has risen 34% to 648.6 euros per share this year, and its current market value is 67 billion 600 million euros.

In the third quarter of fiscal year 2019, Hermes sales increased 18.2% to 1 billion 728 million euros compared with the same period.

Swatch

As of Friday's end, the Swiss watch giant Swatch (Swatch) group has fallen 3% this year to 277.5 Swiss francs per share, with a current market value of 14 billion 200 million Swiss francs.

2019 in the first half of fiscal year, Swatch Group sales fell 4.4% to 4 billion 78 million Swiss francs year-on-year, net profit fell 11.3% to 415 million francs compared to the same period.

Richemont

As of Friday's close, Switzerland's luxury goods giant Richemont has risen 19% to 74.68 Swiss francs this year, and its current market value is 42 billion 200 million Swiss francs.

Last Friday, Lifeng group just announced the key financial data in the first half of fiscal year 2018: sales grew by 9% over the same period last year, reaching 7 billion 400 million euros, with net profit of 869 million euros, down 61% from the same period last year. The continuing turmoil in Hongkong, China, has seriously affected the performance of the group in this important market. Sales in the second quarter dropped to two digits year-on-year, especially for jewellery and watches.

Over the past few years, the strong purchasing power of China's millennials has been an important engine of growth for several major luxury goods companies in the past few years, so the slowdown in China's consumption signals may pressure the previously strong luxury stocks.