Last week was not an easy one for luxury stocks. As we can see from our chart investors in luxury companies suffered from widespread losses, which spared only a handful of names.
In the core segments of the luxury universe retracements in the 1%-2% order of magnitude were common while the biggest losses were recorded in the auto sector.
Ferrari did provide again a notable exception as it retains the top spot as the most brilliant luxury stock in 2019. Last week a barrage of less than stellar economic news hit investors, among them a decline of -0,8% in January German industrial production, while consensus forecast saw a rise of around +0,5%, a 20% decline in February Chinese exports and basically zero jobs added in the same month in the US. Some of these figures can be explained by contingent reasons like the sub-arctic weather that plagued the North American continent recently. Undoubtedly though we are facing a real economic slowdown, after a robust stock rally in the first 2 months of the year.
It is wise to be reminded that luxury stocks are strongly cyclical and of top of that they already gifted investors with excellent returns in the early weeks of 2019, returns vastly above their respective benchmarks. Some weak spots though are starting to emerge, particularly in the auto sector (as we mentioned with the notable exception of Ferrari).
German giants went through a very negative week, in this case losses vastly exceeded the local market as a whole, due to the dismal German data we mentioned above. In a few weeks, once earnings season kicks in, investors will have a clearer picture.
Needless to say bottom lines strongly beating expectations will be more than welcome, particularly in a year like this, so far best described by the abundant supply of guidance cuts. In the meantime it is likely we entered a phase where a higher degree of selectivity would be advisable.
|Estee Lauder||20.30%||New York|
|Ralph Lauren||18.48%||New York|
|Capri/Michael Kors||16.80%||New York|