(BFM Stock Exchange) – After a complicated start to the year, the sector is under pressure on its flagship markets, namely the United States and China. HSBC evokes a “rare quenchman of the planets” in the second trimester.

Formerly superstar of the Parisian square or even the European market, luxury has lost its superb on the stock market. This is evidenced by the beginning of the year Cacochyme in the sector. The STOXX EUROPE 10 pan-European index has been 2.4% since January 1, largely underperforming all the equity markets. The Stoxx Europe 50 thus advances 5.8% over the same period.

The first part of 2025 was difficult for the sector, which was not spared by uncertainty about American customs duties. Remember that outside of Louis Vuitton, no large European group has significant local production capacity in the United States. This means that luxury products bought by Americans on their soil are largely imported from Europe.

The last season of the results, however not so bad at the CAC 40 scale, has also proved to be disappointing for French luxury groups.

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The hard fall of LVMH

LVMH, perceived as a barometer in the luxury sector due to the diversity of its trades (fashion and leather goods, jewelry watches, spirits, cosmetic perfumes …) has seriously disappointed, with a decline in its revenues of 3% in data comparable to the first quarter, including a 5% drop in fashion and leather goods, when analysts hoped for a 0.5% recovery.

Even Hermès did not meet expectations with growth of only 7% in comparable data when investors were 8% -9% for the first quarter, according to Deutsche Bank.

In terms of stock market performance, LVMH fell from its pedestal, accusing a fall of 25.9% since the beginning of the year, when Kering, which has experienced great sorrows to revive Gucci (the Italian brand represents just under 45% of its income and 62% of its current operating profit), abandons 27.22%. True to its reputation for action resistant to the storm, Hermès is getting better (+0.33%) but underperform the CAC 40 (+5.8%).

Some titles supervise in Europe. Burberrry (+10% and especially+40% over a month) sent encouraging signs on its recovery, while Richemont (+10%), owner of Cartier and Van Cleef & Arpels, benefits from its positioning.

Richemont is a specialist in “hard luxury” (jewelry, watchmaking) as opposed to “soft luxury” (fashion, leather goods). As Deutsche Bank noted in April, this category of luxury products is less penalized than the others by the disappearance of so -called “suction” customers, less wealthy than more traditional buyers and which tends to opt for less expensive items.

“Disassembly of planets”

But, overall, the painting remains quite black for luxury. For the rest, if a second part of 2025 of better ilk is hoped, the second trimester may be harder, even much harder, than the first.

As Bernard Arnault pointed out, during the general assembly of LVMH, mid-April, the difficulties appeared at the end of the first quarter of 2025, that is to say in March. “Until the end of February everything went very well and then we arrived in front of a global geopolitical and economic situation which was turned upside down by potential customs duties, by worsening international crises, which disturbed a bit on March,” said the CEO of LVMH.

Deutsche Bank has, in mid-May, noted that statements reporting a “lower commercial environment (for luxury, editor’s note) in the United States has intensified”. The German bank notably mentioned the words of the CEO of Kering, François-Henri Pinault, who had declared during a parliamentary hearing in May that the group had faced “a fairly large consumption of consumption in the United States for a few weeks”.

The manager recalled as such that these American consumption expenses are very correlated with the good health of Wall Street, regardless of “social class” of consumers. However, the American markets have faced a strong volatility since the start of the second quarter.

HSBC wrote in a recent note that the sector was facing, in the current quarter, a rare “disalgrimation of the planets”. Chinese and American clienteles-China and the United States are the two largest markets by far-both under pressure at the same time, without a third growth engine taking over, and the vigor of the euro penalizes activity. The weakness of the European currency could once encourage American customers to buy luxury items in Europe.

“Concretely, the second quarter is faced with specific problems with a slowdown in American spending in Europe (psychology and the exchange rate are problems) and a reversal of Chinese spending in Japan (arbitration of last year prices, with a very low yen, is finished)”, warns HSBC.

Cost pressures

Chinese customers could, during a large part of the year 2024, count on the weakness of the Japanese currency to do its shopping at a lower price. The former financial director of LVMH, Jean-Jacques Guiony, now at the head of the “Wines and spirits” division, had explained that Fukuoka, a big Japanese city, was only two hours on a boat from the Chinese coast.

This effect linked to the weakness of the Yen is now in the rear view mirror. This phenomenon, however, played less for Hermès, of which 90% of sales in Japan are made with local customers, underlined its financial director, Éric du Halgouët, in 2024.

To evoke a striking figure, HSBC fears that the activity of LVMH, a barometer of the sector therefore, knows a violent low point in the second quarter, with overall income which would fall, according to its forecasts, from 7% over one year in comparable data. Fashion and leather goods, the flagship division of the company, would accuse an 11%drop, still according to forecasts from the Sino-British bank.

“The second quarter will be worse for LVMH as for most other players in the sector,” warns HSBC. The establishment remains relatively confident on the number one of luxury and expects the best days from mid-2010, but “it is too early to play this (on the stock market, editor’s note)”, according to him.

In a note published last week, the Jefferies bank has not been more optimistic. “Since the end of the season of publications of the first quarter in luxury, gloomy prospects have been emerging,” wrote the bank.

“In the United States, the general resumption of consumer expenditure does not seem to extend to the highest prices (despite an almost complete recovery of the S&P 500 stock market index). Sales of the week of vacation linked to labor festival at Chinese customers appear disappointing,” she enumerates. “And the travel expenses updates underline the weakness of the beginning of the second quarter,” adds Jefferies, evoking figures which report a drop of 14% over a year of trips to Europe, in April.

“At the same time, potential challenges linked to exchange rates and customs duties will likely lead to pressure on the costs of goods sold later in the year, at a time when consumers are more sensitive to prices,” warns the bank.

Investors will have to be patient in the face of these uncertainties. Luxury groups will only publish their activity in the second quarter and their first semester results that during the second part of July, in a month and a half.