The previous week marked probably the most negative for the luxuy sector in 2019. This segment of the market was significantly impacted by the return of the fears surrounding the global economy. Triggering the sell-off on Friday 22nd (Monday 25thin Asia) were worse than expected European data particularly in France and Germany.
The spike in the fear gauge ignited what is a fairly typical reaction for this sector, which saw a vast increase in their beta to the general market. This type of companies generally speaking can outperform when the economy is really strong and also when equities as whole are stagnant, due to a strong alpha displayed in those scenarios. The dynamic though becomes markedly negative when things go south.
Among our group of 20 stocks 16 saw more or less significant declines. Among them Ralph Lauren and Tod’s managed to wind down the week pretty much unchanged while Tiffany and Prada rose. The latter though just enjoyed a partial rebound after a disastrous week, a rebound which by the way came to an abrupt end on Monday 25th. On the other hand the previous Friday it was Ralph Lauren turn to get trounced more than 3%, offsetting the gains of the previous sessions.
Generally speaking, in a reversal of what was witnessed during the previous days, the discretionary consumer sector was a major contributor to the general under-performing. This is definitely not an entirely unexpected development as we are talking about a segment of the market which is generally more volatile than high end luxury names. Investors found a strong exception in Tiffany, thanks to a good quarter and a bigger focus on their own domestic market rather than the humongous but marred by hazy prospects Chinese one.
Once again French giants did provide us with some relative stability, on the other hand German luxury car makers were affected by the disappointing economic news.
Finally the strong decline registered by Moncler stock, triggered by the sale of the 4,8% stake owned by the French fund Eurazeo (which by the way booked a handsome profit) represents an interesting case: is the decline just a temporary blip or it could instead represent the inception of a prolonged phase of less positive momentum for this stock? Time will tell.
|Company||Performance YTD||Stock Market|
|Estee Lauder||22.60%||New York|
|Ralph Lauren||16.21%||New York|
|Capri/Michael Kors||15.24%||New York|