Luxury’s in full swing, now rules France’s CAC 40 index
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Luxury’s in full swing, now rules France’s CAC 40 index

If you were wondering whether talk about a luxury resurgence over the past year was overblown, you may want to take a look at France’s CAC 40 Index. It’s the second-best performer among its peers, and is currently trading at pre-2007 levels – and over the last year, it’s been taken over by luxury companies.

LVMH rose to prominence a year ago, becoming France’s biggest company by market cap. Rival Kering had some catching up to do – but slightly more than 2 years and 200% later, it’s joined LVMH at the top of France’s business elites. Now, the two companies have reshaped the CAC 40 Index, finally unseating the pharmaceutical industry as France’s major denominator, and replacing it with the luxury sector.

graph 2105 france

 

Bloomberg describes the CAC 40 as “the French benchmark, long the realm of energy, infrastructure, financial and telecommunications stocks,” and puts LVMH and Kering’s ability to redefine it down to “booming demand from Asia and Millennials for designer handbags, flashy shoes and clothes as expensive as jewels.”

Christopher Guyot, Invest Securities analyst in Paris, thinks the two companies in question deserve more of the credit. He says they are: “Well managed and have been more successful that others in attracting new clients globally via Ecommerce, without cannibalizing their traditional business. LVMH and Kering in particular still have a strong potential for growth. This has indeed reshaped the CAC 40.”

LVMH and Kering have both seen their share prices surge year to date

graph 2105 france 2

SOURCE: Yahoo Finance

There are few examples as compelling as that of the CAC 40 when it comes to charting the luxury sector’s return to prominence in recent times. Other French companies like Moncler and Hermes International are playing their part, and most analysts see Kering’s fortunes continuing to grow. Bloomberg cites continuing demand for Alessandro Michele’s “crystal- and flower-coated creations” as a driving force, and notes that 19 of 26 brokerages that cover the stock rate it as a “buy”.

Hermine de Bentzmann, a Raymond James analyst in Paris, sums up his position succinctly, saying: “We believe Kering’s story should continue to unfold successfully, as the group takes a new step by becoming a full luxury player, which we believe will allow it to continue to increase market share in the future.”

Disclosure

Dominion holds LVMH, Kering, and Moncler, in its Global Trends Luxury Fund.


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