As we approach 2024, the luxury market, particularly for industry giants like LVMH, is poised for a transformative journey. Unlike the dynamic surge witnessed in 2023, attributed to China’s spending spree on high-end items, the upcoming year is forecasted to kick off on a more subdued note, with optimism for a revival in the latter half. Analysts at BNP Paribas describe it as a «game of two halves» for luxury stocks, including powerhouses like Richemont and Kering SA.
The impressive start to 2023, propelling LVMH to a market value exceeding $500 billion, now appears distant. Economic indicators signaling a potential slowdown in China’s recovery have tempered sentiment. With Chinese consumers contributing around a quarter of the global luxury market, projected to reach 40% by 2030, a resurgence in their demand will be a pivotal factor in validating expectations for a robust second half.
Flavio Cereda from GAM UK Ltd acknowledges the current volatility but anticipates signs of a reversal by Easter. Investors see an opportune moment to capitalize on stocks, with LVMH and Richemont trading over 15% below their 2023 peaks.
Raphael Thuin, Head of Capital Markets Strategies at Tikehau Capital, notes the market pullback as an opportunity to redeploy in the sector. Despite a challenging first quarter expected due to peak buying levels in China, analysts suggest a more favorable landscape in the second half of 2024, driven by tourism growth and increased demand from Chinese consumers.
Concerns about a potential shift towards experiential spending rather than luxury purchases are countered by the resilience of luxury companies, particularly those with strong brands like Hermès International. Telsey Advisory Group CEO Dana Telsey cautions that shoppers may prefer experiences over luxury goods, a trend to watch.
As brokers adopt a cautious stance due to economic uncertainties, luxury companies are viewed as generally resilient, given their strong brand positioning. BNP Paribas Asset Management portfolio manager Olivier Rudigoz emphasizes the industry’s attractiveness for long-term investors, especially in light of the rising middle class in China and other emerging markets.
