3 Luxury Stocks Poised to Benefit from China’s Economic Comeback

InvestorPlace03-29

China’s luxury purchases are expected to make up at least 20% of the worldwide market by 2030. Moncler (MONRF): The high-end sports and outerwear brand saw revenues rise 25% in Asia. Estee Lauder (EL)...

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Interestingly, the demand for these luxury items often increases as their prices rise. In this piece, we look at the top luxury stocks to benefit from the much-anticipated economic recovery in China. \nLuxury companies tend to perform robustly, even in economic downturns, primarily because their target demographic consists of wealthy consumers less affected by price fluctuations. In this regard, China’s luxury market is one of the most important segments for nearly all luxury companies. \nChina’s stock market, despite a $6 trillion loss from its 2021 peak, is showing promising signs of recovery, though it has yet to reach those peak levels. LVMH (OTCMKTS:LVMUY), a leading name in luxury, recently reported a significant 30% increase in fashion and leather goods sales in China for December 2023. \nMany see it as a shift in consumer behavior, with a substantial number of Chinese consumers opting to make luxury purchases domestically rather than overseas — a trend bolstered by the pandemic’s travel restrictions. Bain & Company’s analysis supports this view, indicating 12% growth in China’s personal luxury market last year, reaching over 400 billion yuan ($56.43 billion). \nDespite the challenges of soft consumer sentiment and a partial return to overseas shopping, projections suggest a bright future, with mainland China’s luxury purchases expected to constitute at least 20% of the global market by 2030.\nLet’s dive into the top three luxury stocks to benefit from China.\nMoncler (MONRF)\nMoncler Group (OTCMKTS:MONRF) is a well-known luxury fashion brand, which is renowned for its down jackets and sportswear products. Originating from France and now based in Italy, Moncler caters to luxury shoppers seeking premium outerwear and fashion pieces. \nMoncler has a significant presence in the Chinese market, a vital revenue source and growth driver for the brand. China’s affluent consumers, with their growing appetite for luxury goods, play a crucial role in Moncler’s global expansion strategy and financial performance.\nThe company recently reported a 15% increase in sales, reaching 2.98 billion euros for the year ending Dec. 31, with a significant sales surge in Asia surpassing analyst expectations. The Moncler brand itself saw a 17% increase in revenue to 2.57 billion euros, while Stone Island’s revenue grew by 2% to 411.1 million euros in 2023. \nBoth brands enjoyed revenue boosts in the fourth quarter, with Moncler and Stone Island up by 17% and 7%, respectively, in constant currency. Asia emerged as the leading region for growth, with Moncler revenues up by 25% and Stone Island by 12% year-on-year. Mainland China was highlighted as the main growth engine by the company’s management. \nThe Asia-Pacific region, including Japan and Korea, also saw significant double-digit growth in Q4. The management attributed part of this success to a surge in tourists to Japan, underscoring the brands’ robust performance in the Asian market. This makes Moncler one of the top luxury stocks to own going forward.\nEstee Lauder (EL)\nSource: Sorbis / Shutterstock.comEstee Lauder (NYSE:EL) is a global leader in luxury skincare, makeup, and fragrance products. Catering to pleasing shoppers seeking premium cosmetic products, Estee Lauder appeals to a wide range of consumers, from beauty enthusiasts to professionals seeking luxurious skincare and makeup. \nThe brand has a significant presence in China, a key market driving substantial revenue growth. The company, whose flagship brands include Clinique, La Mer and MAC Cosmetics, has had a challenging year, mostly due to its high exposure to the Chinese market. This makes it a prime candidate for outperformance should the economic growth in this region pick up in 2024.\n“Today, the biggest debate around Estee Lauder is whether the current issues in China and travel retail are structural or transitory,” Jefferies analyst Ashley Helgans said in a note.\nEstee Lauder attributes 40% of its total sales to China and travel retail. These sectors have been pivotal to the company’s growth in the last seven years, according to Helgans. Facing volatility in the Chinese market, the company is adapting by regionalizing its supply chain with a new manufacturing plant in Japan. \nThis strategic move, as recently stated by CEO Fabrizio Freda, aims to stabilize operations and cater more effectively to the Chinese market. Freda highlighted plans to elevate the company’s luxury status in China by raising prices without impacting sales volumes, addressing the excessive discounting that became prevalent during the Covid-19 pandemic.\n“We are working on dramatic increases in the way we go to market,” Freda said\nFerrari (RACE)\nSource: ShutterstockThe third luxury stock to benefit from China is Ferrari (NYSE:RACE), the iconic Italian luxury sports car manufacturer. It has clients who place a high level of focus on exclusivity, prestige and engineering excellence. In China, Ferrari has seen growing interest in its cars, capitalizing on the country’s increasing wealth and appetite for luxury goods. The upscale carmaker is expanding its market presence there.\nFerrari stock has been strong recently, mainly due to the fact that the luxury carmaker said recently it expects sales and core earnings to keep rising this year. CEO Benedetto Vigna highlighted the company’s robust order book, strong across all regions, fully covering the year 2025. \nIn a major and much-anticipated move, Ferrari is set to unveil its first fully electric car in the final quarter of next year, marking the brand’s entry into a new era. This is especially important for its push in China, where EV makers have done well in recent years given the country’s subsidy policy.\nOn the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.\nShane Neagle is fascinated by the ways in which technology is poised to disrupt investing. He specializes in fundamental analysis and growth investing.\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\nSubmit\n\n\n\n\n\n\n\nArticle printed from InvestorPlace Media, https://investorplace.com/2024/03/3-luxury-stocks-to-benefit-from-chinas-economic-comeback/.\n©2024 InvestorPlace Media, LLC","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2423106831"}