Luxury goods brands LVMH and Kering ‘reshape the CAC 40’
Geneva — A year ago LVMH, the owner of luxury brand Louis Vuitton, became France’s biggest company by market value, a mantle energy giant Total and drug maker Sanofi had shared for almost a decade. Rival Kering was nowhere in sight.
A more than 200% rally since the start of 2016, and more than 70% over the past 12 months, has now put the owner of "it bag" brands within shouting distance of the top five stocks in the CAC 40 index. The spectacular rise in both companies’ fortunes, fuelled by booming demand from Asia and millennials for designer handbags, flashy shoes and clothes as expensive as jewels, is reshaping the French benchmark, long the realm of energy, infrastructure, financial and telecommunications stocks.
The CAC 40, the second best performer behind Italy among major European peers this year, is trading at levels not seen since before the global financial crisis in December 2007.
France’s luxury companies "are well managed and have been more successful than others in attracting new clients globally via e-commerce, without cannibalising their traditional business", Christian Guyot, analyst at Invest Securities in Paris, said in an interview. "LVMH and Kering, in particular, still have a strong potential for growth. This has, indeed, reshaped the CAC 40."
Beauty or pharma?
While Total remains the number two on the index, L’Oréal holds the number three spot, just ahead of Sanofi, signaling that investors are as willing to put their money into makers of make-up and other beauty products as in those of life-saving medications for diabetes or cancer. Sanofi was the CAC 40’s top stock back in 2013. Kering’s rally has propelled it to seventh, up from 15th a year ago.
With demand for designer Alessandro Michele’s crystal-and flower-coated creations showing no signs of abating, Kering is likely to become an even hotter asset in the months to come, according to several analysts. Of 26 brokerages that cover the stock, 19 have buy ratings, five advise holding Kering shares, and only two say sell, according to data compiled by Bloomberg.
In a May 15 note to clients, Hermine de Bentzmann, an analyst at Raymond James in Paris, said, "We believe Kering’s story should continue to unfold successfully, as the group takes a new step by becoming a full luxury player, which we believe will allow it to continue to increase market share in the future."