Costa (Citigroup): 'For luxury transitory slowdown, in 2025 recovery also in M&A'

The slowdown in revenues and profits has often led to a heavy de-rating of stock market prices in the sector. Is a de-rating of valuation multiples taking place?

Again, I would urge against generalisations. Hermès continues to have 'its' valuation multiples. In general, I would say that at this stage luxury multiples have fallen to more normal levels. But on average the price-to-earnings ratio is still around 20, a level enviable by other industries.

Does the fall in quotations make the prospect of an M&A recovery more likely or more distant?

It is clear that, in a phase of slowing demand, the focus of the management of luxury groups is more on business management than on acquisitions. But already those who are stronger are evaluating the opportunities on the market. The M&A is set to restart.

Looking at stock market multiples, Hermès seems not to have been affected at all by the crisis and continues to quote over 40 times earnings. Do you think it will take advantage of this to make acquisitions?

The strategy of Hermès, like that of Chanel, is clear and successful: business growth without the need to make acquisitions. I would be surprised if the strategy were to change.

The European giant Lvmh is in the throes of a top management reorganisation that sees the role in the group of the second generation of the Arnault family increase. Will something also change in the strategy? Or will growth through acquisitions continue?

The changes at the top have taken place as part of a continuity strategy. I see no shake-ups on the horizon. Lvmh has become a global giant that spans various luxury sectors. I expect that in the future they will acquire other brands to strengthen the vertical channels they have already built.

Since the beginning of the year, Kering, which controls Gucci among others, and Burberry have lost over 40% of their stock market value. Do you think that the relaunch will only require industrial actions or will it also pass through M&A operations? The uncertainty concerns above all Burberry, which for months has been considered a 'prey' on the market....

Kering has a highly effective shareholder base and top management. Gucci's temporary crisis should be compared with the growth of the previous ten years. As for Burberry, the new CEO was well received by the market, which showed appreciation for the relaunch strategy.

Moncler and Prada are the two Italian biggies worth the most on the stock market. Do you think they will also grow through acquisitions?

Meanwhile, I am pleased to point out that, even in a period of market contraction, both Moncler and Prada continue to grow. They have effective shareholders, management and strategies that are yielding results that are also appreciated on the stock market. At this stage I believe that they too are focused above all on business management. But in perspective I do not exclude that they also aim to grow through acquisitions.

In the US, the antitrust has blown up the merger between Tapestry and Capri Holdings, which among other things controls Jimmy Choo and Versace. Do you think the Italian fashion house could be sold?

The management of Capri Holdings has stated that the group is now open to a review of its subsidiaries. There is no doubt that Versace is a brand with great potential, just as Michel Kors has a much larger target market than luxury.

You were advisor to the merger between Luxottica and Essilor years ago. Will the new Essilor led by CEO Francesco Milleri continue to grow?

I am certain of this. They have a clear and modern business vision and are focusing on the new 'Med-Tech' sector in which they will also grow through acquisitions.