This luxury capitulation has barely begun

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{"text":[[{"start":7.42,"text":"The business of luxury is seduction. "},{"start":9.937,"text":"The aesthetics, the textures, the aura of exclusivity all conspire to turn savvy customers into true believers. "},{"start":16.592,"text":"That logic is not supposed to apply to hard-nosed investors. "},{"start":20.047,"text":"Yet their approach to the sector also veers into blind faith. "}],[{"start":24.32,"text":"See, for instance, the market’s reaction to LVMH’s — horrible — sales figures. "},{"start":30.487000000000002,"text":"The luxury juggernaut’s key fashion and leather goods business, which includes brands such as LV and Dior, was down 5 per cent in the third quarter as the Chinese consumer finally capitulated. "},{"start":40.653999999999996,"text":"That points to a much sharper slowdown than feared. "}],[{"start":44.510000000000005,"text":"Yet investors greeted this with surprising aplomb. "},{"start":47.627,"text":"Indeed, the main shock over Wednesday’s mini luxury sell-off was just how mini it was. "},{"start":52.657000000000004,"text":"Competitors’ shares were down a couple of percentage points. "},{"start":55.849000000000004,"text":"And LVMH itself fell by less than the magnitude of cuts to forecast earnings. "},{"start":60.592000000000006,"text":"Indeed, at 21 times next year’s earnings, the group’s valuation is not far off from mid-cycle multiples of 23 to 24 times, according to Thomas Chauvet at Citigroup. "},{"start":70.697,"text":"The market, it seems, sees this as a classic macro downturn — and one that will soon reverse. "}],[{"start":77.37,"text":"That is rich. "},{"start":78.81200000000001,"text":"It assumes that China’s as-yet-hazy stimulus programme will rapidly feed through into higher consumption. "},{"start":84.19200000000001,"text":"Analysts, for instance, are pencilling in mid-single-digit sales growth for LVMH next year. "}],[{"start":90.84,"text":"More worryingly, it is by no means clear that, when the macro drag eventually clears, the luxury sector will seamlessly return to rapid growth. "},{"start":99.04400000000001,"text":"Successive price rises may have turned some customers off. "},{"start":102.437,"text":"In an era of fantastically chic but not terribly exciting “quiet luxury”, there are also murmurs about product desirability. "}],[{"start":110.19,"text":"That leaves the luxury sector as a whole exposed to further disappointments. "},{"start":114.307,"text":"True super-premium companies such as Hermès and Ferrari — impervious both to macro and fashion cycles — should be relatively sheltered. "},{"start":121.874,"text":"Brands such as Prada<phoneme alphabet=\"ipa\" ph=\"\">/</phoneme><break time=\"0.3s\"/>Miu Miu, which have recently found favour with consumers, might be cushioned from the worst of the impact. "}],[{"start":null,"text":"<div class=\"pic\"><picture><source media=\"screen and (max-width: 490px)\" srcset=\"https://thumbor.ftmailbox.cn/unsafe/980x0/https://d6c748xw2pzm8.cloudfront.net/prod/0d29d5a0-8bbd-11ef-be24-63147f4e8dc5-mobile.png\"><img src=\"https://thumbor.ftmailbox.cn/unsafe/1920x0/https://d6c748xw2pzm8.cloudfront.net/prod/0d29d5a0-8bbd-11ef-be24-63147f4e8dc5-standard.png\"></picture></div>"}],[{"start":130.07,"text":"LVMH is not in this camp. "},{"start":132.512,"text":"The group’s heft has traditionally been an advantage, enabling it to invest in talent, marketing and real estate. "},{"start":138.654,"text":"But momentum at LV and Dior has been relatively weak, suggests a Bernstein analysis of brand desirability. "},{"start":144.922,"text":"It may not help that the group is in the midst of a creative and managerial transition, which will take time to gain traction. "}],[{"start":151.44,"text":"LVMH’s premium to the sector has compressed from about 40 per cent in March to about 6 per cent today, on Bloomberg numbers. "},{"start":159.019,"text":"The luxury sector is a long way from regaining its swagger. "},{"start":162.387,"text":"And LVMH, unusually, has work to do itself to recover its shine. "}],[{"start":167.12,"text":""}]],"url":"https://creatives.ftmailbox.cn/album/001104480-1729124465.mp3"}

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This luxury capitulation has barely begun

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