As inflation bites into consumers’ budgets and the money supply tightens, discretionary spending can be expected to decrease in the coming quarters. Major luxury goods names such as Kering (PPRUY), Compagnie Financiere Richemont (CFRUY), and LVMH Moet Hennessy Louis Vuitton (LVMUY) seem to be bucking this trend.
Amid a challenging global backdrop, and despite these names having a low TipRanks Smart Score, they have recorded robust sales growth recently. Let’s find out why.
Kering Delivers Sales Better than 2019 Levels
On April 21, Kering reported a 27% year-over-year jump in its first-quarter revenue, at €4.96 billion. Despite uncertainty induced by global geopolitical tensions and COVID-19 restrictions in China, which is a major market, Kering saw double-digit growth across its verticals.
While Balenciaga and Kering Eyewear delivered a robust performance, Gucci’s strong performance in America and Europe was hampered by its China sales.
Importantly, directly operated stores saw a 32% jump when compared to the 2019 period, and online sales made up 15% of the company’s total direct sales.
Despite this outperformance in a challenging macro backdrop, shares of the company have declined ~34% so far this year. The stock has a price/earnings multiple of 19.4 and a price/sales ratio of 3.7.
While Kering currently has a TipRanks Smart Score of 2 out of 10, both hedge funds and retail investors are lapping up the stock. Hedge funds have increased holdings in Kering by 718,300 shares in the last quarter.
Also, TipRanks data indicates the number of TipRanks portfolios holding Kering has increased 12.3% in the past 30 days.
Compagnie Financiere Richemont Sees Sales Acceleration
Switzerland-based Richemont operates in four business areas: Jewellery Maisons, Specialist Watchmakers, Online Distributors, and Other (mainly fashion and accessories). Its brand portfolio includes Cartier, Van Cleef & Arpels, Buccellati, Piaget, Montblanc, and Purdey.
The company witnessed sales growth acceleration in its most recent Fiscal third-quarter performance. Richemont witnessed double-digit sales growth across all of its regions, channels, and business areas.
Compared to the year-ago period, the company saw a 38% growth in Jewellery Maisons, 37% growth in Other, and 25% growth in Specialist watchmakers. The company continued to see rebalancing in the regional sales mix, with Asia pacific making up 38% of Group sales. Europe and the Americas contributed 25% and 23% of Group sales, respectively.
Richemont shares have declined 25% so far this year. With a price/earnings multiple of 25 and a price/sales ratio of 3.9, Richemont is still expensive when compared to Kering.
While Richemont’s TipRanks Smart Score of 4 out of 10 is better than Kering’s, both hedge funds and retail investors seem less optimistic about the stock. Hedge funds have decreased holdings in Richemont by 547,900 shares in the last quarter.
Further, Tipranks data indicates the number of TipRanks portfolios holding Richemont has dropped about 36.6% in the past 30 days.
LVMH Moet Hennessy Louis Vuitton SE Sees Robust Start to 2022
On April 12, Louis Vuitton reported a good start for the first quarter of 2022. Revenue increased 29% over the prior year to €18 billion. Barring Wines & Spirits, all verticals of the company witnessed double-digit growth in this period.
Importantly, along with double-digit growth in the U.S. and Europe, Louis Vuitton also recorded growth in Asia despite tighter restrictions in China. Further, the company’s largest vertical, Fashion & Leather Goods, recorded a 35% growth over the prior-year period.
Moreover, amid a challenging backdrop, the company saw an excellent performance at Tiffany & Co, Bulgari, as well as its Perfumes and Makeup vertical. While robust demand in Europe and Japan helped Champagne volume increase 14%, Hennessy’s volume decreased 18%, owing to logistics challenges and the impact of COVID-19.
Shares of the company are down 22.5% so far this year. The stock has a price/earnings multiple of 25.4 and a price/sales ratio of 5.0 and seems to be priced similarly to Compagnie Financiere Richemont.
Louis Vuitton currently has a TipRanks Smart Score of 4 out of 10. Hedge funds and retail investors seem to share different opinions about Louis Vuitton stock as well. Hedge funds have decreased holdings in the company by 321,000 shares in the last quarter.
However, TipRanks data indicates the number of TipRanks portfolios holding Louis Vuitton has increased 2.4% in the past 30 days.
Closing Note
A combination of at least a 22% share price decline so far in 2022 and double-digit sales growth make a compelling case for these well-known luxury names.
In addition, these companies have shed away global macro jitters, COVID-19 impacts, logistics challenges, and shocks from increasing rate hikes to keep delivering robust sales growth across geographies and business verticals.
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