Yahoo Lifestyle ‘Dior is Back’ – But Sephora Could Be Spun Off: HSBC
Revisiting an idea luxury analysts plumped for decades ago, HSBC is suggesting Sephora “may not prove to be a good fit” for LVMH Moët Hennessy Louis Vuitton.
In a report published Friday on the luxury giant, the bank floated the possibility of a retail spin-off, with Sephora lauded as a fast-growing category killer but one that “is somewhat capped from a margin perspective given it is a retailer.
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“Although we do not believe the group is looking to divest assets in the short term, with the possible exception of DFS, a heavily loss-making business that (LVMH chief executive officer Bernard Arnault) has declined to comment on at recent results presentation, we think it is possible in the future to aid simplification and split off categories,” said HSBC, which has a buy rating on the stock. “We think LVMH shares would benefit from simplification.”
The report also suggested the wines and spirits division, now being run by Jean-Jacques Guiony, formerly LVMH’s chief financial officer, and former Tiffany executive Alexandre Arnault could also be considered noncore, even if the next two years are likely to be spent “restructuring a business that has lost efficiency.”
“In the long term, with the younger generation less inclined to drink alcohol and the reality that some funds cannot have exposure to LVMH shares because of that part of the portfolio, we wouldn’t rule out that once cleaned up, the division might itself be separated from the rest of the group,” said the report, which lists as authors the analysts Erwan Rambourg, Anne-Laure Bismuth and Aurelie Husson-Dumoutier.
Trimming down to pure luxury – essentially fashion and leather goods, plus watches and jewelry – “could give the company a lighter, more coherent portfolio that the market might value more highly.”
Shares in LVMH have fallen by about 14 percent over the past year, and on Friday traded at 691 euros. HSBC increased its price target to 888 euros from 850 euros.
Also on Friday, HSBC changed its outlook on Dior following a recent trip to Paris which gave it some “positive vibes.”
It now expects sales at the French fashion house to be flat at constant exchange rates in 2025 versus an earlier forecast of a 4 percent to 5 percent decline this year.
HSBC downplayed the creative renewal playing out at the brand, following the resignation earlier this month of men’s creative director Kim Jones and ubiquitous speculation that Loewe’s Jonathan Anderson will soon be installed at Dior.
“We see product introductions starting to reverse the sales decline, even before any impact from a new creative direction,” the report said, highlighting the recent introduction of the soft, cross-body handbag known as the D-Journey, “that seem to be moving the needle.”
The D-Journey was introduced on the brand’s spring 2025 women’s runway.
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