How did luxury goods withstand the stock market panic?

The cut in two interest rates in China on July 22 had already triggered a wave of concern about the Chinese economy's ability to recover. This boost, which was supposed to enable households and businesses to take out loans at better rates, was, above all, intended to support activity and hence consumption. This point, crucial to confidence and hence to growth in luxury goods, is still lacking. However, the plunge at the end of July of major US technology stocks (Tesla, Alphabet) after disappointing half-year results undermined stock market values, including those of the luxury goods sector. Even the bitcoin market is suffering: the star cryptocurrency lost more than 13% on Monday to trade below the $50,000 mark. The US market, also gripped by uncertainty in the face of the fall in employment (the US Federal Reserve announced that only 114,000 jobs had been created, compared with 176,000 expected), is now again fearful of a recession. One sure sign of this is that the copper index, a global indicator of the economy because it is linked to the industry level, has fallen by more than 20% in the United States since May.

In Japan, the reaction was short in coming, with the Japanese central bank announcing an increase in interest rates. The backlash was brutal: the announcement sent global equities tumbling last week. What happened to luxury goods?

The sector also suffered, although some stocks have been recovering over the past week. On March 14, LVMH shares were trading at 872 euros, compared with 624 euros on August 5 and 635 euros on August 12, at the time of writing. Kering shares were trading at €426 on March 14, compared with €249 today. Compagnie Financière Richemont shares were trading at 149 Swiss francs on 14 March, compared with 128 francs on 12 August. Hermès International was counting on a share price of €2,392 on March 14, compared with €2,000 today. The share price even fell below this fateful mark on August 5, during the global stock market panic.

Since their peak in March 2024, the luxury giants have lost some splendour. Swiss watchmaker Swatch Group even saw its first-half net profit plummet by 70.5%.

Kering, faced with the general slowdown in the luxury goods sector and the difficulties of its flagship house Gucci, whose Sabato de Sarno collections have yet to convince, has already anticipated a fall in its operating profit in the second half of 2024, which is likely to plunge a further 30% after a 42% fall in the first half of 2024.

Although it is difficult to predict the future of luxury brands over the next six months - with the geopolitical crisis in the Middle East potentially very dangerous - analysts believe that LVMH and Hermès remain quality stocks to bet on.