Whatâs Going On Here?LVMH, the worldâs largest luxury conglomerate, revealed third-quarter sales late last week that were, like, far fancier than analysts had hoped â and the French giant had China to thank. What Does This Mean?Ignoring the effects of currency swings, LVMHâs revenue was 12% higher than the same time last year, flying in the face of forecasts for a 1% decline. Chinese consumers typically contribute half the annual growth in global luxury spending, and last quarter they didnât let a piddling pandemic stand in their way. Instead of traveling to Europe or the US, however, shoppers bought local: LVMH made more selling high-end handbags in China than it did a year ago. The countryâs luxury lovers also splashed their cash on liquor brands like Hennessy Cognac â meaning overall revenue at LVMHâs drinks unit declined by just half as much as feared. Why Should I Care?For markets: Glass half full (of MoĂ«t).
LVMH is seen as a bellwether for luxury: an indicator of the entire industryâs health and direction. The companyâs stronger-than-expected update â which helped its stock rise 7% on Friday â may now put rivalsâ forthcoming updates in a more flattering light. HermĂšs, home of $300,000 Birkin bags, makes half its sales in Asia, while Gucci owner Kering does a lot of business in China; the companiesâ share prices respectively rose 2% and 4% as investors likely anticipated good news to come.
The bigger picture: Stuck in the K-hole.
Recent data illustrates how the coronavirus crisis has benefited the rich while further disadvantaging the poor â a so-called âK-shaped recoveryâ thatâs attracting the attention of policymakers and investors alike. European luxury stocks are, on average, up almost 30% over the last six months, buoyed by well-heeled spending â while the regionâs stocks overall have risen only 20% as some mass-market companies suffer from more reserved customer spending. | 