A diverging luxury sector

Generally speaking the last week was positive for luxury stocks, albeit with some notable exceptions we will talk about in a bit. What has happened in the past  few days almost seems like  a text-book case of the scenario we outlined in the recent week. As we have mentioned the majority of luxury stocks scored gains well above the general benchmark of their own domestic markets, which is to be expected during risk-on phases.

As usual the best performances were recorded by top quality luxury companies, which are leaning on a very high endowment of confidence from investors. French conglomerates, top American companies, the latter buoyed by a renewed tide of optimism in the consumer discretionary space, and even the most brilliant Italian names all belong to this batch of privileged names.

At the same it cannot be denied that markets are getting more and more selective with less and less tolerance for even mildly disappointing numbers. The 2 worst performers of the last 5 sessions appear as the epitome of the phenomenon previously described. Specifically we are talking about Brunello Cucinelli and Prada: both companies recently suffered steep, brutal losses in the course of a single session, on March the 15thand 18threspectively. On those dates both stocks declined more than 10%, the equivalent of what is considered a whole correction.

Brunello Cucinelli out out the final figures for 2018, which were overall fairly good: revenues were up around 10%, earnings and 2019 guidance though letdown investors. On the other hand Prada had to settle for flat sales in the second half of 2018, after reporting double digit growth in the first 6 months.  Unsurprisingly the difficult Chinese macro situation took the blame for it with investors expecting much higher EBITD and EBIT figures.

As a matter of fact within the luxury sector a remarkable dispersion of returns is emerging, where winners and losers are separated by their ability to push through the ongoing economic slowdown without suffering major losses and maybe even taking the chance to increase their market share. Thus in the foreseeable future investors must expect increasingly selective markets.

Azienda Performance YTDMarket
Ferrari33.67%Milano
Moncler 27.51%Milano
Estee Lauder 25.09%New York
LVMH 22.99%Paris
Christian Dior22.88%Paris
Capri/Michael Kors21.12%New York
Kering20.43%Paris
Tiffany19.94%New York
Hermes 19.84%Paris
Ralph Lauren16.74%New York
Richemont 14.70%Zurich
Porsche 8.25%Frankfurt
Ferragamo6.90%Milano
Burberry6.37%London
Brunello Cucinelli5.30%Milano
BMW5.15%Frankfurt
Tod's1.50%Milano
Tapestry/Coach-4.59%New York
Prada-13.38%Hong Kong
Tesla -17.24%New York

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