After a tough few weeks of market action, the French luxury stocks seemed to have found themselves in the bargain bin. Indeed, the macroenvironment has been far from perfect for high-end luxury product companies. Last month’s French election uncertainties have also added to the volatility wave hitting the names.
With iconic, prestigious and incredibly old brands at their side, the French luxury stocks are likelier than not to land on their feet. Even if demand stays mixed, the margins of these French luxury firms are the envy of most other firms in high fashion and apparel.
Over the next 18 months, perhaps a recovering Chinese consumer could help French luxury firms return to growth. At the end of the day, China’s booming middle class looks like a secular tailwind for the luxury darlings.
In any case, I think there’s a nice entry point after the latest slip, especially for investors seeking to diversify their portfolios beyond the tech sector. In this piece, we’ll examine three top-tier French luxury stocks worth going into the over-the-counter markets for!
Hermès (HESAY)
Hermès (OTCMKTS:HESAY) makes a strong case for why it’s the most luxurious of the French high-end brands. Undoubtedly, many middle-class consumers may know the brand name best for being behind those incredibly expensive (but very nice-looking), high-end Apple (NASDAQ:AAPL) Watch bands. Depending on the Apple Watch model you go for, the Hermès bands can be pricier than the actual watch itself!
It’s hard to argue that Hermès is a massive status booster for those with extra disposable income sitting on the sidelines. The name screams extreme luxury. While demand for such splurges could fluctuate as what’s left of inflation weighs some consumers down, I continue to view the name as a solid holding for any portfolio that seeks exposure to high-margin growth.
Unlike Hermès’ upscale goods, HESAY stock looks very affordable at today’s prices. With a strong international growth narrative, momentum in China, and the ability to stay resilient amid economic uncertainty, the name may very well be a top July buy now that it’s down over 12% from its March peak.
Kering (PPRUY)
Of the trio of French luxury names, Kering (OTCMKTS:PPRUY) stock is under the most pressure, now down close to 63% from its all-time high hit almost three years ago. The company’s main brand, Gucci, has endured some tough sledding in recent years.
Indeed, Gucci in the bargain bin seems like a quick and easy way to boost sales as status-seeking consumers look for fancy status symbols at a reasonable price. That said, discounting can cause long-lasting damage to a luxury brand.
That’s a major reason why CEO François-Heri Pinault seeks to pull back on the discounts as his firm aims to focus more on the high-net-worth consumers rather than aspirational ones who’d be more inclined to buy Gucci attire at a discount.
Of course, discounting isn’t the enemy of luxury brands per se. However, it does entail greater risks. As management better understands these risks, I do view Kering as an intriguing name to buy on a turnaround.
LVMH (LVMUY)
LVMH (OTCMKYS:LVMUY) is a far more diversified luxury goods play than Kering or Hermès. Despite this, Dior and Louis Vuitton are still the heavy hitters for the firm. If they go down, the odds are that LVMH stock will be under pressure.
In any case, the two high-end brands have been performing relatively well, even in the face of the “uncertain” environment that the firm cautioned about many months ago. With shares of LVMUY down 24% from their 2023 all-time highs, perhaps now’s as good a time as any to pick up the name.
At a 20.6 times forward price-to-earnings ratio, LVMH shares look quite cheap as they head into quarterly results with expectations of “flat” revenue growth. Should Chinese demand surprise to the upside, I’d not be surprised if the name were to reverse course in a hurry.
On the date of publication, Joey Frenette held a long position in Apple. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
