Kering, LVMH, Hermes stock prices have slipped: buy the dip?

Luxury goods stocks have nosedived as growth in key markets like China, the European Union, and the United States slows. LVMH stock price crashed to a low of €659.6 this week, down by more than 24% from the highest level this year. As a result, Bernard Arnaut’s net worth has dropped by over $4.6 billion to $157 billion.

Kering, the parent company of Gucci, Balenciaga, Bottega Veneta, and Yves Saint Laurent, crashed to €391, the lowest level since March 2020. It has crashed by over 47% from the highest point this year. 

Similarly, Hermes shares have also collapsed. The stock nosedived to €1,761, the lowest point since March 2023. It dropped by over 12% from the YTD high. In Switzerland, shares of Swatch Group have dived to CHF 230.6, 30% below its 2023 highs. 

Luxury goods companies are going through a major reset as the global economy slows. These firms saw robust growth during the pandemic as interest rates remain at historic lows and as stocks and cryptocurrency prices soared.

On Tuesday, Kering said that its overall sales dropped by 9% in the third quarter to over €4.4 billion. All brands except Kering Eyewear and Corporate were in the red. LVMH, on the other hand, saw its revenue in the nine months rise to over €62.2 billion as its China and US slowed.

Hermes, on the other hand, published relatively strong financial results. Its sales rose to €3.4 billion in the third quarter and by 22% in the first nine months of the year.

Is it safe to buy the dip?

LVMH, Kering, Hermes, Swatch stocks

Therefore, does it make sense to buy the dip of companies like LVMH, Hermes, and Kering? Broadly, I suspect that the luxury goods industry will continue slowing in the coming months as interest rates remain in an elevated level.

The biggest risk for these companies is China, a key market. Recent data shows that the country’s economy is not doing well, which has pushed the government to launch a stimulus package. 

In the long term, however, I believe that buying the dip in these luxury goods stocks makes sense. Historically, these companies tend to be more stable than consumer staples because they target the upper class, which has more discretionary spending.

Most importantly, these shares will bounce back if central banks start slashing interest rates. Analysts expect the Federal Reserve to start cutting rates in 2024.