DE30: Hermès' surprising results support Europe's luxury goods sector

• Markets in Europe gain on wave of improving broad market sentiment
• Investor attention focused on Hermes and Puma results

Overall market situation:

Tuesday's session on European markets brings better investor sentiment. Yesterday's improvement in sentiment in the US, today's session in Asia and better results from Puma (PUM.DE) and Hermes (RMS.FR) support the attempted rebound in the markets. On the other hand, a somewhat tentative picture of the European economy was shown today by PMI data, which performed slightly worse overall. 

At the moment, most of the companies listed in Europe during Friday's trading session are trading down. Source: xStation 5

Futures based on the German DE30 are trading nearly 0.38% higher on an intraday basis and are trading near local lows from March this year. Yesterday's session brought an attempt to unwind the recent declines, as the chart shows a clear lower shadow. Source: xStation 5

News:

The shares of fashion company Hermès (RMS.FR) are gaining nearly 3% in today's session following the release of better-than-expected quarterly results. The company's results are perceived as a bit of a surprise, as after the LVMH (MC.FR) earnings reading, the market was more likely to assume a scenario of capital withdrawal from luxury goods, which is reacting to slowing retail sales in most major economies. On the other hand, however, it is worth remembering that Hermes distinguishes itself from its competitors primarily by the type of customer that shows much greater resilience to economic uncertainty. No small part of this is due to the pricing of the company's strategic products, such as Birkin handbags, whose retail prices start at $10,000, with individual models selling for as much as $50,000 on the secondary market.   

The luxury goods manufacturer maintained strong performance in all regions, benefiting from exposure to an affluent and loyal customer base.

Selected company results:

• Sales at constant exchange rates +15.6%, estimated +13.2%. 
• Sales of leather goods at constant exchange rates +15.8%, estimated +12.5%
• Revenue from watches at fixed exchange rates +22%, estimated +19%
• Revenues from perfumes at constant exchange rates +6.3%, estimated +7.39%
• Revenues in the Americas at constant exchange rates +20.4%, estimated +15.7%
• Revenues in Asia at constant exchange rates +12.3%, estimated +10.7%
• Revenues in Europe at constant exchange rates +18.1%, estimated +14.3%

COMMENTS:

• Company with "confidence" to continue operations through the end of 2023 
• Confirms revenue growth target at constant exchange rates in the medium term
• Analysts at Citi believe that given the gloomy mood in the broad fashion and luxury goods markets, the company's ability to generate such strong results may cast a good light on the company in the medium term.  

Detailed results presented by the company. You can find more in the report here. Source: Bloomberg Finance L.P.

Puma (PUM.DE) reiterated its full-year outlook on Tuesday and reported a higher-than-expected profit margin in the third quarter, reassuring investors after a stronger euro dragged down the German brand's quarterly earnings.

Puma's operating profit came in at 236.3 million euros, down from 257.7 million euros a year earlier, but revenue exceeded analysts' expectations, reaching 2.31 billion euros

Gross profit margin rose 30 basis points to 47.1% (Q3 2022: 46.8%), despite strong unfavorable currency factors. 

PUMA is on track to achieve its full-year forecasts, the company added 

Both companies are currently leading growth in the apparel and fashion sectors. Source: xStation5 

Analyst recommendations:

* Duerr AG (DUE.DE): HSBC cuts target price to EUR 22 from EUR 38

* Duerr AG (DUE.DE): HSBC cuts to hold from buy

*  Duerr AG (DUE.DE): Baader Helvea cuts target price to EUR 30 from EUR 38

* Compagnie Financiere Richemont SA (CFR.CH): Jefferies cuts target to CHF 130 m CHF 140

* Burberry (BRBY.UK): Jefferies cuts target price to 1,800p from 2,200p

* LVMH (MC.FR): Jefferies cuts target price to EUR 710 from EUR 780

* Kering (KER.FR): Jefferies cuts target price to EUR 420 from EUR 440

* Swatch (UHR.CH):Jefferies cuts target price to CHF 240 from CHF 260

The largest percentage changes in individual companies in the DAX index. Source: Bloomberg Finance L.P

Information from individual companies in the DAX index. Source: Bloomberg Finance L.P.