L'Oréal surpassed LVMH

On Tuesday (September 15), cosmetics giant L'Oréal overtook LVMH to become the publicly listed company with the highest market capitalization in France. As sales growth of high-end luxury goods enterprises slows down and their performance remains sluggish, the entire industry is under sustained pressure.

Specific market data shows that by the close of the French stock market, L'Oréal's share price fell by 0.78%, with a market capitalization equivalent to 234.54 billion US dollars; LVMH closed down 2.64%, with the latest market capitalization standing at 231.44 billion US dollars.

Analysis points out that this is the first time since 2017 that a "non-luxury goods company" has taken the top spot in market capitalization at the close of a trading day on Euronext Paris. Affected by factors such as the war in the Middle East, the global luxury goods industry has continued to contract over the past three years.

According to data from consultancy firm Bain, around 60 million consumers have stopped buying luxury goods. The continuously rising prices have made products from high-end fashion brands increasingly unaffordable for many consumers.

Berenberg analyst Nick Anderson referred to the so-called "lipstick effect": when the economic outlook is sluggish, consumers are more likely to buy small consumer goods at lower prices than high-end handbags, shoes and clothing.

"People simply cannot afford these expensive luxury goods, so they turn to buying some small luxury items, such as the commonly mentioned lipstick, to make themselves feel better."

LVMH is controlled by the family of the company's CEO, French billionaire Bernard Arnault. In 2021, driven by the consumption boom during the pandemic, LVMH once became the company with the highest market capitalization in Europe.

But now, LVMH's market capitalization has been left far behind by Dutch lithography machine manufacturer ASML. ASML's current market capitalization is about three times that of LVMH; at the same time, Swiss pharmaceutical giants Roche and Novartis also have a higher market capitalization than LVMH.

According to current stock market data, LVMH has also fallen out of the list of the top 10 companies by market capitalization in Europe. Meanwhile, Arnault has lost the title of "the richest man in Europe", and his personal wealth has fallen behind that of Amancio Ortega, founder of Zara.

Anderson from Berenberg said that apart from the super-rich group with small scale but still strong consumption power, LVMH is facing the problem of structural insufficient demand.

"We are worried that taxes are being raised across Europe. You also have to face inflation concerns, as well as employment concerns that may be caused by AI. There are some worrying factors everywhere right now."

Stefan Bauknecht, equity portfolio manager at German asset management firm DWS, said: "I do not see a significant improvement in the trend of the luxury goods industry." He also believes that L'Oréal's current lead over LVMH is very likely to continue.

This article is from the WeChat Official Account "CLS", written by Zhao Hao, and published by 36Kr with authorization.