Moncler shares struggle despite defying luxury's Middle East slump
- Moncler's first-quarter sales beat expectations late Tuesday.
- But shares fell on Wednesday, with one analyst flagging potential profit-taking following the positive earnings surprise.
- Italian Moncler's print contrasted starkly with those of French peers LVMH, Kering, and Hermes, which all saw a bigger negative impact from the conflict in the Middle East.
Moncler shares struggled on Wednesday, despite posting quarterly results that beat earnings expectations on Tuesday.
The earnings beat followed a series of underwhelming reports from European luxury players last week.
LVMH, Kering, and Hermes disappointed investors with earnings misses last week, driven by subdued sales in the Middle East amid the conflict there, which is in its seventh week.
But Moncler saw a smaller impact from the Iran war and solid performance in Asia. It flagged that momentum had started to fade in March. Shares fell as much as 3% in morning trading but later pared losses to trade 1% down by 8.56 a.m. London time (3.56 a.m. ET).
Bernstein analyst Luca Solca, said that the company "smashes" expectations in the quarter but added the looming "seasonal lull" could tempt investors to take profit on a share price spike following the positive surprise.
Many luxury players have seen their business suffer over the past few years, following a boom in demand during Covid-19, which led to price hikes that alienated customers. Consumer demand from China — formerly one of the sector's main growth drivers — has also been weaker.
Moncler's first-quarter group sales came in at 881 million euros ($1.04 billion) at constant currencies, while analysts polled by FactSet had expected 827 million euros.
Asia sales, roughly half of group sales, rose 22% year-on-year, while the Americas rose 7% in the quarter.
Jefferies analysts noted "remarkable strength" in China of a double-digit increase, as they hiked their price target on the stock to 60 euros from 54 euros.
EMEA sales, however, declined by 1% from a year ago, "penalised by relatively subdued tourism trends into the region and a weak online performance," Moncler said.
The 16 billion euros market cap company, known for its high-end outerwear, has engaged in a campaign to expand the brand beyond its winter heritage to an all-season luxury wear.
"One wonders how much of this [China sales] was driven by Moncler's '100 days of activations'," noted Barclays analyst Carole Madjo.
Chinese consumers have reacted strongly to the quarter's plethora of brand activations such as events in Aspen and tied to the Winter Olympics, Madjo said, adding: "This drove a significant improvement in mix, as Chinese consumers reached for heavier jackets in the Edit and Grenoble collections."
"Whether consumers will continue to keep Moncler in mind during the warmer months remains the brand's main bugbear."