The fashion sector has not been insulated from tariffs wars. Many large fashion brands have already been battling a downturn in sales in key East Asia markets which does not seem to be ending anytime soon. This is prompting some soul-searching at board level at some of the biggest fashion groups in the world, as they seek to adapt to the rapid changes tariffs have introduced.
In this article we compare Kering [Euronext:KER] and Hermès [Euronext:RMS] and analyse some of their recent numbers. Which stock looks like the better bet as we move into the second half? We will end with a look at some of the main strengths and weaknesses of the companies.
Kering's tough love in China
Fashion sector analysts say Kering is facing a tough reality as its two main luxury markets, China and the United States, are under strain. China’s consumers have become cautious, preferring to save rather than spend on luxury, while the US market is wobbling under political unpredictability that is clouding consumer confidence. Kering shares have been rallying however, up from around the €155 mark in April to trade at €225.65 at time of writing. This is not to be sniffed at.
Product desirability is now a bigger problem for Kering than any tariff threat. Desirable brands like Hermès can nudge prices higher without hurting demand, but brands such as Saint Laurent and Gucci do not currently enjoy that level of pricing power. Analysts point out that creative stagnation is not helping, with designers spending much of their time mining archives rather than bringing fresh ideas to the market.
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