By Carol Ryan
For a discerning shopper, there is now rare value in Europe's top luxury houses.
Shares in the sector are down sharply after three major luxury companies reported shaky first-quarter sales this week.
Investors were already dumping the stocks over worries that ultradiscretionary purchases like Tiffany necklaces and Birkin handbags might be jettisoned by consumers once missiles started flying in the Middle East. But the panic could be going too far, especially for the strongest names in the sector.
The Iran war isn't the only problem. At Hermès, demand is weak in China, and sales at its crucial handbag division have slowed. Investors are asking whether Hermès's unique business model -- where customers are encouraged to make big purchases in other parts of the store to get access to ultraexclusive Birkin and Kelly bags -- is breaking down.
Gucci is still in the doldrums and sales fell 8% in the quarter. Collections by new designer Demna are going down well with American consumers, but shoppers everywhere else are nonplussed so far. This was a reality check for the brand's parent company Kering that a turnaround may take longer than hoped.
The world's largest luxury company LVMH is also in a holding pattern. It is waiting for collections by new Dior designer Jonathan Anderson to boost sales at the fashion and leather-goods division, which drives nearly 80% of LVMH's operating profit.
None of this is good news for a sector that was hoping sales would finally recover in 2026 after being roughly flat for two years. Costly mistakes such as raising prices too aggressively in recent years have damaged demand for designer goods.
But a handful of luxury stocks have fallen so much that there is a case to buy the dip. Prada is trading at 12 times projected earnings -- a record low for its time as a publicly listed company. Its average multiple since the brand's 2011 IPO is 28 times.
Brunello Cucinelli, the quiet-luxury brand favored by tech billionaires, had been hit by the sour mood across the sector. Even though the stock has risen in recent days after the company reported impressive 14% sales growth for the first quarter, it is still at a discount to where it usually trades.
Hermès and LVMH are trading 20% and 15% below their 10-year average price-earnings multiples, respectively. The two stocks have traditionally been treated as safe havens in lean times, so the size of the discounts is unusual.
Hermès in particular caters to ultrarich shoppers, who care little for rising gas prices and whose spending will only really be crimped by a stock-market slump. So far, that hasn't happened -- the S&P 500 is back trading close to record highs.
Some of the weaker turnaround names in the sector look less compelling. Investors bid up Kering and Burberry last year in hopes that the companies would pull off successful makeovers. Until there are clearer signs of progress, it might be safer to steer clear.
The old axiom is to be greedy when others are fearful. Luxury stocks are a bet that greed won't be gone for long.
Write to Carol Ryan at carol.ryan@wsj.com
(END) Dow Jones Newswires
April 15, 2026 12:00 ET (16:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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