×
747
Fashion Jobs
CLINIQUE
Clinique - Consultant - Melbourne International Airport- Part Time
Permanent · Melbourne
TIFFANY & CO
Sales Manager - Pitt Street
Permanent · Sydney
LOVISA
Expression of Interest - Regional & State Managers
Permanent · Miranda
MUNRO
Assistant Payroll Manager
Permanent · MELBOURNE
DAVID JONES
Production Manager - Womenswear - Country Road
Permanent · MELBOURNE
DAVID JONES
Paid Social Analyst
Permanent · MELBOURNE
DAVID JONES
Merchandise Planner - Womenswear
Permanent · Melbourne
DAVID JONES
Sales Expert - Designer Womenswear - David Jones Elizabeth Street
Permanent · SYDNEY
L'OREAL GROUP
National Sales Director - Redken & Pureology
Permanent · Melbourne
SMIGGLE
Supply Coordinator - Smiggle
Permanent · Melbourne
DAVID JONES
Sales Manager - Bourke Street Mall - David Jones
Permanent · Melbourne
DAVID JONES
Product Safety & Traceability Manager
Permanent · Melbourne
DAVID JONES
David Jones | Assistant Support Manager Loss Prevention | Hay st
Permanent · Perth
L'OREAL GROUP
Brand Manager- l'Oreal Professionnel
Permanent · Melbourne
L'OREAL GROUP
Assistnnt Product Manager- Kerastase & Shu Eumura Art of Hair
Permanent · Melbourne
L'OREAL GROUP
Brand Manager - Garnier
Permanent · Melbourne
L'OREAL GROUP
l'Oreal Precision Advertising Manager
Permanent · Melbourne
L'OREAL GROUP
Commercial Finance Business Partner
Permanent · Melbourne
L'OREAL GROUP
Business Consultant - Kerastase
Permanent · Adelaide
L'OREAL GROUP
Business Consultant - Loreal Professionnel
Permanent · Sydney
PETER ALEXANDER
Supply Coordinator - Peter Alexander
Permanent · Melbourne
DAVID JONES
David Jones | Sales Manager | Menswear | Market Street Store
Permanent · Sydney

U.S. tariffs won't harm French luxury firms' appeal

By
Reuters API
Published
today Dec 5, 2019
Reading time
access_time 3 minutes
Share
Download
Download the article
Print
Click here to print
Text size
aA+ aA-

The U.S. threat of tariffs on French goods from handbags to Champagne proved just a glancing blow to giants like LVMH and Kering this week, as investors refused to give up their decade-long love affair with luxury goods.


Louis Vuitton - Spring-Summer2020 - Womenswear - Paris - © PixelFormula


The European luxury conglomerates are the leading lights of continental exchanges, just like digital behemoths Facebook, Amazon, Apple, Netlix and Alphabet's Google (FAANGs) are the vanguard of Wall Street stock indices and portfolios.

Equity analysts reckon the appeal of companies such as Hermes, whose Birkin handbags sell for $10,000-plus and often have waiting lists, will be undimmed despite attempts to hit their exports as retaliation for European taxation of U.S. digital companies.

With a price tag of over 200 billion euros, Louis Vuitton and Christian Dior owner LVMH is the biggest stock by market capitalization on the Paris exchange and is worth twice as much as pan-European planemaker Airbus which is also at the centre of the transatlantic trade war.

Last year, LVMH, which just spent over $16 billion snapping up U.S. jeweller Tiffany , generated 24% of its revenue in the U.S., but only about 6% of its operating profit would be exposed to tariffs on France, said Aneta Wynimko, a portfolio manager at Fidelity International.

"For me, these tariffs are manageable", said Claudia Panseri, an equity strategist at UBS Global Wealth Management.

"When I look into the total amount of sales generated by luxury goods in French I think the impact will be small".

LVMH's rival Kering, owner of Gucci and Yves Saint Laurent, has a smaller market capitalization of 68 billion euros, but that still makes it bigger than Paris-based BNP Paribas, which is the euro zone's biggest bank.

Kering and LVMH have seen their shares multiply over 6 times within 10 years, while the pan-European Euro STOXX has risen by two thirds.

In a nutshell, French luxury groups are to European equities what the FAANGs are to Wall Street.

Valuations for both groups make them expensive stocks. LVMH's 12-month forward price-to-earnings ratio is around 24, well above the pan-European STOXX 600 index's 14.7.

"It's deservedly, like the FAANG stocks, on a high price earnings multiple," said Jonathan Bell, chief investment officer at Stanhope Capital who says he has LVMH on his "buy list".

The U.S. threat to hit France with up to 100% tariffs on $2.4 billion of U.S. imports of products, including cosmetics and porcelain, did knock a few percentage points off share prices, but for Bell, the impact is likely to be temporary.

"In the long run I think most of the owners of LVMH are people that (are) a bit like Warren Buffet in Coca Cola, they buy it and own it for the long term."

The revenues of LVMH and Kering are much more aligned to the growing appetite for luxury brands from a new generation of Chinese shoppers rather than U.S. shoppers and Fidelity's Wynimko said high pricing power protects luxury brands.

"If someone has been waiting for the Birkin handbag for, I don't know, three years, and now the bag is available and it costs $500 more I doubt they are going to say 'no, I'm not going to buy it because of the tariffs'," said Fidelity's Wynimko.

LVMH, Kering and Hermes declined to comment for this story.

© Thomson Reuters 2020 All rights reserved.