Consumer Discretionary

Report by Starling Advisors

Q1 results proved that the long trade into numbers was crowded as the shares fell 10% despite a strong performance. However, Alex Dwek believes the investment thesis remains intact. Cartier and Van Cleef continue to gain market share in a branded fine jewellery category that remains fundamentally attractive. The 1) comeback of the Chinese consumer, 2) strong pricing power and 3) continued luxury consumer appetite for CFR's timeless and iconic jewellery and watches should enable it to navigate well in a period of softening US demand. CFR has shown in the past its ability to anticipate market and regional trends and redeploy efficiently. At 17.9x, the stock currently trades close to 1 SD below its 10-year historical mean P/E.

Consumer Discretionary

Report by Willis Welby

Revisions for stocks in this sector continue to improve with the median move in consensus Y2 EBIT over the last three months now an upgrade of 3.7%. These good revisions alongside recent share price weakness mean the implied to Y3 EBITM ratio has fallen back to 97. Moreover, consensus Y3 revenue growth of 7.5% is still a big premium and for most stocks should compound well for shareholders. In this report, Willis Welby focuses on the opportunity at Richemont, but also likes Inditex which has had very strong revisions post recent results as well as Moncler.

Consumer Discretionary

Report by Willis Welby

Luxury Goods have had a reputation for being one of Europe’s growth areas for a long time and last month they performed well ahead of wider indices. Although the median implied to Y3 EBITM ratio of Willis Welby’s large cap universe is now 96, that still feels tenable given the generally high levels of financial productivity and the almost universal high levels of current and projected revenue growth. In this note, they focus on Cucinelli. While the company is currently on a roll, Willis Welby finds expectations ratios far too high and financial productivity too low. The likes of Kering, Inditex, Richemont and Moncler look far more appealing.

Consumer Discretionary

In the space of just five years, the share prices of the three French heavyweights, Hermès, Kering and LVMH have more than tripled - this is not far short of FAANG-style performance. However, given the scale of the growth and the return expectations already discounted, Piers Nestler wonders if these stocks are beginning to have a scarcity value themselves. If there is some value for money left, he believes it is most likely to be found in the watches and jewellery segment (highlights Richemont and Swatch), which has at least the potential to surprise on the upside.