LVMH, Hermes, Prada share prices hit as Kering nosedives

Luxury goods stocks came under pressure on Wednesday as concerns about the Chinese market continued. Kering share price crashed by more than 10% after the company published weak financial results.

This drop triggered a major sell-off among other luxury group companies. LVMH, the biggest luxury group in the world, dropped by over 2%. Similarly, Hermes and Richemont stock prices also plunged by more than 2%. Dior and Prada stocks also retreated.

This sell-off happened after Kering published weak financial results. The company’s sales in Asia, its fastest-growing market, tumbled by over 20%. It also expects that its first-quarter revenue retreated by 10%.

Therefore, other luxury brand companies like LVMH, Hermes, Prada, and Dior plunged because of Kering’s warning.

Kering vs Hermes vs Prada vs LVMH stocks

Still, it is unclear whether its slowdown in Asia is broad-based or just Kering-related. For one, as I wrote recently, Kering has struggled in the past few months. It has also become the second-worst-performing company in the industry after Burberry. 

Hermes, on the other hand, has done well, as it outperformed other companies in the luxury goods segment. It has done that by being mindful of its brand and manufacturing a limited amount of goods. This strategy has helped lead to more demand than supply.

LVMH has also done well as it grew its business in Europe, Americas, and China. The biggest challenge, in my view, is that LVMH continues to have a conglomerate discount. For starters, LVMH is a giant conglomerate with over 70 companies in its umbrella.

Burberry has been the worst-performing company in the sector as its stock has lost over 50% of its value in the past few years. Its growth and profitability has come under intense pressure.

Annual results published a few weeks ago showed that Kering’s total revenue dropped by 4% in 2023 to over €19.5 billion. Its net income came in at €2.9 billion while its free cash flow dropped to €1.9 billion. 

Therefore, it is unclear how Kering will turn around its business. Because of its size of €44.5 billion, the company is difficult to acquire. Therefore, it could become the acquirer as it seeks to supercharge its business. 

It could also sell some of its underperforming brands. Kering owns Gucci, Yves Saint Laurent, Bottega Veneta, and other brands. It could also cut costs in other ways, including layoffs.