Europe’s glittering luxury companies, the region’s top stock-market performers in 2023, may see yet more gains driven by a rebound in Chinese spending, but for some the sector is starting to look expensive.
An index of European luxury goods retailers has rallied around 18% so far this year, outperforming the wider pan-European STOXX 600, which is up 6.2% in the same time frame. The price-to-earnings ratio of the MSCI Europe luxury index is around 26, while that of the broader STOXX is closer to 13, according to Refinitiv data.
“Currently we don’t see this sector as undervalued anymore ... there were some opportunities last year, but they are fairly valued now, or a little too overvalued at the moment,” she said. The ability to increase the price of products without losing customers has stood out as a key strength of Europe’s luxury brands, and remains in focus for equity investors even as inflation on the continent eased in December.
LVMH’s most recent earnings showed a 9% rise in organic sales in the fourth quarter as shoppers in Europe and the United States splurged over the holiday season, helping partly to offset COVID-19 disruptions in China.