The sales of fashion companies will fluctuate in recent months due to the geopolitical situation, the consumption crisis and the weather. How will it go on in the next few months and what can be expected from the markets? According to Kevin Thozet, a member of the Carmignac investment committee, an independent, family -run European investment company, whose capital is completely owned by the family and the employees, the markets show remarkable efficiency despite the current uncertainty at a record level. “Catching a falling knife is never easy: That is why it is crucial to rely on stocks with high and regular growth prospects that tend to do better when there is a moderate downturn,” emphasizes Thozet.
In 2021, in the middle of the market of the markets to Covid and the recovery of economic growth, the luxury sector was in full expansion. Today, share prices have dropped by an average of ten percent in the year.
“In view of the now historical highs of uncertainty and fears that the stagflationary nature of US politics could result in a clear recession, both extremes of the consumption area indicate that the recession pressure increases. Since the real economy is increasing for further difficulties, global stock investor: inside that searches for an opportunity in this reporting season could Sector, both absolutely and relative, consider luxury stocks, ”says Thozet.
An evaluation of the relative development of the daily course of the Walmart share- the reference in the consumer goods sector in the United States- compared to luxury goods companies and a recess period in the USA, shows that consumer goods tend to achieve better performance when the economic cycle of an expansion phase is transferred into a high or contraction phase. According to Carmignac’s expert, a look at individual shares in a macroeconomic and geopolitical context that is difficult to decipher can offer interesting insights.
“LVMH was the first company in the luxury sector to publish the quarterly results that were below expectations,” explains Thozet. “According to the consensus forecasts, the group’s business and leather goods division should record stable organic growth in the first quarter. Reality was very different, especially in the area of high-end fashion and leather goods, due to the decline in consumers: inside in the USA, Japan and to a lower scale. Power of price, ”said the expert, who added that the hopes for a recovery of the share in the second half of the year are high beyond the first quarter.
The luxury group LVMH recorded a sales decline of two percent and amounted to 20.3 billion euros in the first quarter of 2025. According to the consensus, profits grow with a rate of twelve percent compared to the decline of three percent in the year, which was recorded in the first quarter, according to the expert: inside of Carmignac.
“But this scenario appears less and less in view of the current organic sales growth. In addition, the negative effects on the prosperity, the stagflationary nature of politics from the US President Donald Trump and the weakening of the US dollar are buried. will be recorded, ”added Thozet.
At the same time, LVMH could reduce costs, especially marketing costs, but the reality is that the effects would be limited. The personnel and rental costs account for about two thirds of the entire company expenses and- with the exception of Asia- the latter are not linked to the income. Discharges are not part of the culture of a family company, especially in view of the importance that is attached to the training and further education of employees. In view of the company’s cost structure, the less brilliant income will therefore largely affect profits, says Thozet
But not all luxury stocks are the same. What will happen to Hermès? While the sector showed signs of weakness in 2024, Hermès managed to reverse the trend and achieve significantly better results, with an increase in annual turnover by 13 percent, a similar pace as in the past ten years. But that could also not be enough to meet expectations.
“Hermès has rarely missed the goal – only once in the past six years – but after an extraordinary fourth quarter of 2024 and a phase of extremely high and extremely difficult demand, the inventory should have decreased,” said Thozet.
In the first three months of the current financial year, the luxury provider remained behind expectations despite sales growth from 8.5 percent to 4.13 billion.
“The most important positive aspect for the manufacturer of the Birkin bags is the usual annual price increase- about eight percent on a global basis. As a result, the focus will be more on the sequential development of the income than on the figures on the annual or quarterly basis: The first quarter of 2025 should be more than the rule for the sector. A lot of reason for joy, since this corresponds to the volume of flat or negative development in the course of the quarter. ”
Sure, you can hope for a positive spring, perhaps thanks to consumer -oriented economic measures in China or a “phase of weakness” of slowing down in the United States.
“In summary, it can be said that Hermès, thanks to growth, which is carried more by the offer and the demand side, should be better off than the competitors: Inside. But with a view to the overall picture, it is difficult at short notice to be optimistic for the sector as a whole.
As for the other segment of the consumption area, the goods of everyday needs, the luxury sector can serve as a warning for those who ask themselves how they can reduce the risk of portfolio in relation to the market.
“Many investors: Inside, have tried to rely on luxury shares because they saw a potential recovery of the profits because the sector was acted with 25 times the forward profit. But the pursuit of shares of the basic consumption goods, such as Walmart, which thanks to their defensive profile are traded with more than 30 times the expected profit Pour, ”concludes Thozet and emphasizes that it is crucial to rely on stocks with high and regular growth prospects that tend to do better when it comes to a moderate downturn.
This article was used with digital tools translated.
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