From LVMH to Tod’s: winners and losers of the next luxury era

Luxury brands prepare for a new era. Luxury sector begins 2019 with its ups and downs: during the upcoming twelve months the industry will slow down its growing pace, though the margins will stand up and not all the companies will be affected in the same manner. The HSCB bank points out in the report Expecting the unexpected: Yes, soft landing remains a distinct possibility in luxury that the sector will grow just by 6%, in contrast with 2018’s 9%. In this context of downturns, the entity explains that only the large luxury groups will face this new stage.

Even though the luxury will lose its pace, the entity underlines the sector is heading towards a growing normalization. In this respect, companies such as LVMH, Kering and Moncler, Richemont, Hermés or Hugo Boss, to a lesser extent, will keep being attractive to investors because they will safe its margins and they will remain isolated from the negative trend. However, HBSC alerts the market about other companies like Salvatore Ferragamo or Tod’s.

The report specifically points out LVMH was able to move forward despite the several crisis it had to face during its trajectory, so it will know how to ride out this year’s downturn. Regarding Kering, the bank noted that despite the fact it depends greatly on one of its brands, Gucci, it is a group that will remain strong in the following twelve months.

Moncler, Richemont or Hugo Boss are some of the groups that will be able to face 2019’s downturn

The bank also points out the sustained recovery Hugo Boss has maintained during the previous months and the growing plan the company set for the period until 2022 will serve to keep the margins in this scenario defined by the downturn.

In respect of Richemont, the bank entity points out it will continue to lead its sector, as during the last months it gained positions in the jewellery sector and lost part of its vulnerability due to depending less on watch sales. The report also gives clues about the future of Moncler and places it as one of the companies that will overcome the downturn slump. The bank defines in particular the Italian company as one of the best positioned in the sector, capable of keeping its expansion through stores.

However, the report alerts investors about companies like Tod’s or Salvatore Ferragamo, as both of them are trading at hefty valuations disconnected from weak fundamentals.

The report notes the Chinese demand will be reduced during the following twelve months

Additionally, the document provides some trends that will arrive to the luxury sector in 2019. Among them is the fact that the younger generation will boost the market. According to the report, millennials and generation Z show an increasingly propensity to consume. Moreover, new technologies will be key in the route map luxury companies are going to follow in the next years.

The report points out as well that the luxury demand from Chinese consumers will slow down this year due to the tensions of trade war and other macroeconomic reasons. In Europe, a more mature market, HSBC also remarks the demand will decrease in comparison to the one from the previous two years.