by
bloomberg
issued
December 27, 2024
For France’s biggest billionaire, 2024 is a year to forget. Their combined wealth has fallen to record amounts due to weak demand for luxury goods and political instability.
The world’s richest men Bernard Arnault, Francoise Betancourt Meyers and Francois Pinault have seen about $70 billion disappear from their collective wealth this year, according to the Bloomberg Billionaires Index. The industry giants they control, LVMH, L’Oréal SA and Kering SA, were the biggest losers on the French stock exchange, with Gucci’s owner selling off 41% of its value.
The three have seen their wealth decimated by the collapse of luxury goods and personal care companies. Chinese shoppers are slowing their spending on purchases ranging from leather goods to designer gowns and skin care, while companies including Kering’s Gucci brand are grappling with new operations and strategies. Political instability in France, including the fall of Michel Barnier’s government this month, has also dampened investor appetite for assets in the country.
“Chinese consumers were supposed to be the growth engine in 2024, but that didn’t happen,” said Ariane Hayate, a fund manager at Edmond de Rothschild Asset Management. “Revenge spending is fading and luxury fatigue is setting in after three years of incredible growth.”
Luxury goods and cosmetics sales have soared during the pandemic as consumers used the cash they saved during lockdown restrictions to splash out on luxury brands. These dynamics helped propel LVMH founder Arnault to the No. 1 spot on Bloomberg’s richest people list. He is currently No. 5 and has lost more money ($31 billion) than anyone among the world’s 500 richest people ever. As for L’Oréal heir Bettencourt Meyers, she has long been the world’s richest woman, becoming the first woman with a $100 billion fortune last year. She has now lost both crowns.
“We’re really back to reality when it comes to luxury,” said Kevin Tozette, a member of the Carmignac Investment Committee in Paris. “What’s going to happen from 2023 is normalization.”
Mr. Pinault, 88, who founded the company that later became Kering, also saw his fortune take a big hit, falling 64% to $22 billion from its peak in August 2021. This is the largest decline of any person on Bloomberg’s Wealth Index over the same period, largely due to problems at Gucci, the company’s largest fashion brand.
Mr Pinault’s wealth dwindled while Kering was under the watchful eye of his son Francois-Henri Pinault, 62, who concentrated his empire from a patchwork of retail assets to luxury goods. But throughout his tenure, Kering remained heavily reliant on Gucci, which experienced waxing and waning successes. The Pinault family owns 42% of the shares and 59% of the voting rights in Paris-based Kering, whose shares have plummeted following a series of profit warnings.
It’s a fall from grace for European luxury stocks, which just two years ago were seen as a continental growth alternative to Wall Street’s “Magnificent Seven” tech giants.
However, the economic slowdown has not affected all luxury brands equally. Hermès’ sales increased through the third quarter thanks to product positioning toward its wealthiest customers, whose spending tends to rebound more than less affluent customers.
Saxo Bank France’s list of 2024 winners and losers included both Hermès shares, which have risen about 18% since the start of the year, and Kering.
Andrea Tueni, head of sales and trading at Saxo Bank France, said that while Hermès’ high profit margins are underpinned by the excellence and rarity of its products, demand for Gucci’s products is declining and recent management He said that the change of sides has not yet borne fruit.
But as the year draws to a close, there is some optimism surrounding the broader sector as investors look to position for a potential comeback.
Analysts at HSBC Holdings say sales in China have not deteriorated further and are recovering in the United States, with the third quarter of this year at the bottom.
“Frankly, we have FOMO,” HSBC analysts including Erwan Lambourt said in a recent note to investors. “We believe sales in China are not deteriorating and sales in the US are improving post-election. These two clusters are important.”
Amundi SA is launching a new exchange-traded fund (ETF) for luxury stocks, citing long-term growth prospects including a growing middle class in emerging markets, the appeal of some brands and rising demand for luxury goods. They just announced the increase. product.
The rally in some luxury goods and beauty stocks has accelerated since early December, as the worst may be over for the sector. The Stoxx600 Europe 600 Consumer Products and Services Index is on track to rise about 5% this month, its best performance since February.
“High tech has dominated luxury goods this year, but luxury goods may make a comeback sometime in 2025,” Rothschild’s Hayate said. “We can expect the sector to recover from the second half of 2025.”
–With assistance from Jack Witzig and Angelina Rascouet.
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