Investors pushing sector’s stocks higher

Though the coronavirus pandemic is still raging throughout large parts of the world and China is facing a resurgence of the outbreak, investors keep pushing luxury goods stocks higher, undeterred by nearrecord valuations.

The combination of robust Chinese spending growth and a strong start to the earnings season is seen supporting stocks such as LVMH, Hermes International and Kering SA, all of which reached record highs in the past two months. The quality of the businesses and their substantial position in the stock market are causing some investors to compare the companies to U.S. technology behemoths.

Cartier owner Richemont, the first major luxury player to report sales for the last three months of 2020, set the tone last Wednesday with quarterly jewelry revenue that far exceeded expectations in spite of renewed lockdowns and no recovery in travel, fueling further gains in the sector.

French conglomerate LVMH, one of the biggest stocks in the Stoxx Europe 600 Index and a bellwether for the industry, is likely to “shoot the lights out relative to peers” when it reports results today, given the strong momentum at its Dior and Louis Vuitton brands, said Swetha Ramachandran, the manager of GAM’s Luxury Brands Equity Fund.