Luxury under pressure in Europe; Cucinelli down in Milan

(Il Sole 24 Ore Radiocor) – Luxury goods sales remain under pressure in Europe, with the Euro Stoxx down 0.64 per cent. Investors are concerned by an article in the Financial Times which examines the state of health of LVMH , the sector’s flagship company. According to the newspaper, the company has lost almost all the gains made by its shares during the industry’s boom in the pandemic era, which had led the company to become the first European firm to reach a market capitalisation of 500 billion dollars. Now, geopolitical tensions are stifling the optimism on which luxury brands rely.

The market capitalisation of the Paris-listed group, which controls brands such as Dior, Louis Vuitton and Veuve Clicquot, has more than halved from its peak in 2023, falling to 213 billion euros. This brings LVMH close to the valuation it had in January 2020, shortly before the start of the Covid-19 pandemic, which had triggered a historic surge in spending in the luxury sector. The fall in the share price came despite operating profit from continuing operations of €17.8 billion recorded last year, more than 50 per cent higher than in 2019. On the stock market, the company’s share price fell by 0.55% on the Paris stock exchange (CAC +0.02%).

But the news from the FT is affecting the entire sector. Also on the Paris stock exchange, Kering is down 1.5 per cent, Hermès 0.14 per cent, L’Oréal 0.36 per cent and Essilorluxottica is down 1.6 per cent. Regarding the latter, it is worth noting the remarks made in Cernobbio by Leonardo Maria Del Vecchio, who explained that regarding Francesco Milleri’s future at the helm of Essilux: ‘The majority of Delfin’s shareholders will decide in due course, assessing – as always – the results achieved by the managers and the strategies for the future. “I would like to shift the focus slightly to this duality that has arisen between myself and Francesco Milleri,” whereas “Essilux must return to centre stage”, as it is “our father’s true legacy” but has “lost 50 per cent on the stock market”.

When asked directly about a change in governance, he replied: “The most important thing is to safeguard and deliver another 10 years of success for EssilorLuxottica; whether it is me, Francesco Milleri or anyone else is not important – what matters are the 250,000 people who work there.” Hence his conclusion on the company’s future: “I hope for a change in strategy and a new phase. Whoever is best placed to reflect these new strategies – which must be agreed with the shareholders – and by ‘shareholders’ I do not mean just the eight of us but also the other shareholders who own 60 per cent of the company, who need a clear strategy and a long-term vision – not for three years, but for 50’.”

Turning back to the sector’s shares, there were also sell-offs in Brunello Cucinelli in Milan, whilst Moncler holds steady after Rothschild raised its target price from 54 to 56 euros and its recommendation from ‘neutral’ to ‘buy’. In London (FTSE 100 -0.14%), Burberry is down 0.7%, whilst in Zurich, Cartier’s holding company, Richemont, has lost 0.84%.