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High-beta luxury weakens; Burberry -5%, Kering -3%

CONSUMER CYCLICALS
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  • The two names we mentioned last-week - after reports of potential pull-back in China footprint from LVMH - are starting the week with broker cuts. Kering also released its bi-annual shareholder letter - nothing significant there.
  • Though we often group Kering with Burberry on these high-beta and China-linked news please note they are two different levels of credit risk; Kering is €20b in sales co with more than 10 luxury houses underneath it. Burberry is €3b in sales, struggling to be profitable and reliant on a single brand.
  • No CoC protection on the new Burberry 30s; equities are at 15yr lows trading at trailing P/E of 8x and compares to peers like Kering on a low-teen multiple, LVMH 20x, Hermes 40x and Birkenstock 50x.
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  • The two names we mentioned last-week - after reports of potential pull-back in China footprint from LVMH - are starting the week with broker cuts. Kering also released its bi-annual shareholder letter - nothing significant there.
  • Though we often group Kering with Burberry on these high-beta and China-linked news please note they are two different levels of credit risk; Kering is €20b in sales co with more than 10 luxury houses underneath it. Burberry is €3b in sales, struggling to be profitable and reliant on a single brand.
  • No CoC protection on the new Burberry 30s; equities are at 15yr lows trading at trailing P/E of 8x and compares to peers like Kering on a low-teen multiple, LVMH 20x, Hermes 40x and Birkenstock 50x.