Stephanie Batchelor: Milford Asset Management analyst on LVMH's shares dropping

As the latest US earnings season picks up, one famed luxury good company has caught attention for all the wrong reasons.

LVMH's earnings report left investors disappointed, with its key Fashion & Leather Goods division seeing a 5 percent revenue drop this quarter.

Milford Asset Management's Stephanie Batchelor explains what's causing this drop.

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Episode Transcript

Speaker 1 (00:00):
For our third quarter earning season in the US is
kicked off with a hesten a rural plenty of volatility,
and there's Stephanie Bachelor from Milford Acid Management is with US.
Ay stepf hi he that okay, what's going on in
the luxury good space because there was a lot of
excitement after the China stimulus announcements, but that's now faded
and it's been overshadowed by pretty weak earnings. Yeah.

Speaker 2 (00:18):
Yeah, so that's right. The one of the key areas
of weakness for luxury goods companies over the last year
has been China because that's historically been a very important
part of the world for them, and of course they've
got a week housing market, very poor consumer sentiment, and
so the Chinese consumer hasn't been traveling or spending as
much as they would historically. If we look at Louis
Vuitton Mouett Tennessee or LVMH, it's the largest luxury goods

(00:41):
company in the world, and it's sort of considered a
bell weather for the space. Its share price was down
about thirty percent between March and September, but when the
China stimulus was announced, the market got really excited. Thinking
that Chinese demand would be reignited, and shares actually moved
up twenty percent in just one week. Following that move,
the stock faded again because questions have started to arise

(01:03):
around you know how long it would take for the
stimulus to boost demand and by how much, because it's
likely more targeted at a lower income consumer, which isn't
the typical luxury goods customer. And then you mentioned earnings, So, yeah,
it was a pretty poor set of numbers. It's key division,
Fashion and leather Goods, had revenue four five percent in
the quarter, and that was the first quarterly decline since

(01:26):
two thousand and nine if you exclude COVID. So shares
fell four percent, and it dragged a bunch of other
luxury names down on the day two.

Speaker 1 (01:34):
Yeah, and then what about the semiconductors, because it sounds
like there's been some winners and losers there as well.

Speaker 2 (01:39):
Yeah, so that's been an interesting space last week. ASML Now,
this is a company that provides equipment to the big
semiconductor manufacturers. They released their results and showed a myths
on orders as well as a reduction to their twenty
twenty five expectations. So shares were down to fifteen percent
on the day, and it caused a bit of concern

(02:00):
that this AI boom might be starting to fizzle out.
But it does seem as though the weakness might might
have been just sort of specific customers or company factors,
because just a few days later, TSMC, which is one
of ASML's customers and is the largest semiconductor manufacturer in
the world, they reported a record third quarter. So it

(02:20):
indicated that, you know, the AI boom is still alive
and well. And so TSMC shares rallied ten percent on
the day.

Speaker 1 (02:28):
Yeah, any bright spots in the evening season so far
for you, Yeah.

Speaker 2 (02:32):
So TSMC is one. But also the big US banks
reported very strong results. They're seeing some green shoots come
through for capital markets. If you look at Morgan Stanley,
they said, you know, we're in the early stages of
the multi year capital markets recovery, and so corporates are
getting more comfortable thinking about mergers and acquisitions or raising equity,

(02:53):
all of which drives those big banks investment banking fees.
And another stockworth mentioning is Netflix, so which you know,
their shares were up eleven percent after it reported its
most profitable quarter Ever, and despite subscriber growth actually slowing,
Netflix still has very attractive opportunities to boost profits through

(03:14):
either its new ad supported membership model or price increase.

Speaker 1 (03:18):
It's fascinating, Stuf Steff. Thank you for runn us through
its Stephanie Bachelor Milford Asset Management.

Speaker 2 (03:23):
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