The relaxation of Covid-19 restrictions, the availability of vaccines, and cash accumulated by consumers fueled growth in Europe in 2021.
TOLGA AKMEN/AFP via Getty ImagesThe relaxation of Covid-19 restrictions, the availability of vaccines, and cash accumulated by consumers during lockdowns fueled an extraordinary 12 months of growth in Europe across a number of sectors.
Top- and bottom-line recoveries in 2021 saw earnings rebound strongly, helping European consumer discretionary stocks rise 31.4% from December 2020 through Dec. 7, outperforming the broader S&P Europe 350 index, which climbed 16.3%, according to independent research firm CFRA.
“European consumer stocks have staged a dramatic recovery and are back to pre-Covid levels,” says CFRA analyst Andrew Tam. The year of the “reopening trade” was boosted by earnings, fiscal stimulus, pent-up consumer demand, and vacation budgets that were redirected toward consumer goods, he adds.
Luxury goods were a standout sector—the stocks on average are up 42% year to date to Dec. 7, according to Tam.
The larger, more-diversified luxury groups has outperformed with above-peer earnings and share price growth, he adds. Cartier owner Compagnie Financière Richemont (ticker: CFR.Switzerland) is up 66%. French fashion house Hermès International (RMS.France) has increased 75%.
Barron’s recently wrote that gains are likely to continue at the world’s largest luxury group, LVMH Moët Hennessy Louis Vuitton (MC.France), which is up 37%. Two stocks mentioned in the column this year also excelled. Barron’s highlighted Italian luxury retailer Moncler (MONC.Italy) in March, when shares reached 49.55 euros ($55.90) on the back of strong online sales and better-than-expected growth in China.
Sales in that key market, as well as in South Korea and the U.S. were behind a 55% jump in sales in the third quarter, Moncler said in October. The stock has since gained 26%, to €62.46.
Barron’s wrote in July that Ray-Ban and Oakley eyewear maker EssilorLuxottica (EL.France) was in a strong position to transform its business on the promise of cost cutting, new products, and possible acquisitions. By September, one of those products was launched: a pair of Ray-Ban’s (in partnership with Facebook parent Meta Platforms [FB]) that comes with built-in cameras and microphones. Shares, which were at €152.23, have jumped 19.4%, to €181.80.
Food, drinks, and tobacco companies lost their lockdown boost as consumers headed back out, but that was mitigated by customers drinking in bars and restaurants, which generates higher margins. British American Tobacco (BTI) was at £25.36 in October when this column highlighted it in October for its investments in new products. It’s now up 9%, to £27.65.
Not all of our recommendations hit the target. In February, United Kingdom online fashion and cosmetics giant ASOS (ASC.UK) was viewed as a big winner during lockdowns over rivals with bricks-and-mortar stores. Its stock was at 57.78 pounds sterling ($76.33), and ASOS appeared on track for international expansion.
But shoppers then headed back to physical stores, and mounting supply-chain problems led ASOS to issue a profit warning in October. The stock has since slumped 60%, to £22.99.
Car makers, faced with supply-chain issues that led to chip shortages, tried to benefit by directing scarce resources to high-margin premium vehicles. For its part, German auto giant Daimler (DAI.Germany) used the slowdown to accelerate its restructuring plan and make a bigger push into electric vehicles, Barron’s wrote in May. It wasn’t enough to boost the stock, which has slid 5.6%, to €69.27.
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December 23, 2021 at 04:00PM
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European Luxury Goods Stocks Were Back in Fashion in 2021 - Barron's
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