In addition, Trump’s 36% tariffs on Thailand could also affect Danish jewellery manufacturer and retailer Pandora, as most of its manufacturing takes place there.
As at April 3, Morningstar has a three-star rating on fairly valued LVMH Moët Hennessy Louis Vuitton with a EUR650 ($954.13) fair value estimate; a one-star rating on overvalued Hermes International with a EUR1,480 fair value estimate; and a five-star rating on undervalued Kering with a EUR448 fair value estimate.
Kering owns brands like Gucci, Saint Laurent, Bottega Veneta, Balenciaga, McQueen and Brion.
Americans account for around 30% of global luxury consumption and sales exposures in the Americas for companies under Morningstar’s coverage range from the mid-teens to high-30%.
See also: Hunting for value in luxury stocks
Moncler, Prada and Swatch are least exposed; EssilorLuxottica, Brunello Cucinelli and Pandora are most exposed, says Sokolova.
“We continue to believe that the luxury industry can offset tariffs with pricing and luxury consumers are globally mobile. For example, about 35% of global luxury purchases are done by tourists. Hence, the share of shopping abroad is likely to increase for Americans,” she adds.
Sokolova sees higher risk from the impact of tariffs on the broader economy and consumer sentiment.
See also: LVMH, Kering, Hermes and luxury consolidation
In particular, a downturn in US equity markets since the beginning of the year “is not a good indicator”. “We found that equity prices had significant predictive power for luxury sales before the pandemic; 59% lagged correlating with luxury industry growth on S&P 500 returns over 2007-2019.”
Despite being economically cyclical, the luxury sector remains resilient in the long run with strong pricing power, low risk of technical obsolescence and high barriers to entry, adds Sokolova. “We see any significant sell-off in the sector as a buying opportunity.”
As at 10.18am on April 4 on the Euronext Paris stock exchange, shares in LVMH are trading at EUR542.80, Hermes is trading at EUR2,329 and Kering is trading at EUR177.60.
