Morgan Stanley upgraded Kering SA (OTCPK:PPRUF) to an Overweight rating on Tuesday after being on the sideline for eight years with the European luxury stock. The firm thinks the Kering (OTCPK:PPRUF) story is starting to change, with several recent developments ...

Group 1 - The first batch of exhibits for the 8th China International Import Expo (CIIE) has arrived in Shanghai, marking the official start of the customs clearance process for this year's event [1] - The first batch includes 279 items such as clothing, bags, and harnesses, with several being global debuts [1] - The exhibitor, Maybach Luxury Goods Asia Pacific Co., Ltd., has expanded its exhibition space from 36 square meters to 300 square meters, doubling the number of exhibits and adding multiple themed exhibition areas [1] Group 2 - The CIIE will be held from November 5 to 10 in Shanghai, with over 3,200 enterprises from more than 110 countries and regions confirmed to participate, covering an exhibition area of over 360,000 square meters [2] - Various transportation methods, including sea, air, and rail, are being utilized to deliver exhibits, with a focus on optimizing convenience measures and enhancing technological empowerment [2] - The customs service aims to elevate its regulatory support level to help more global enterprises access the Chinese market [2]

Group 1 - The U.S. government is planning to impose punitive tariffs of up to 100% on countries like China and India that purchase Russian oil, aiming to cut off Russia's energy export lifeline amid the Ukraine conflict [1] - The U.S. has set a condition for this policy, stating it will only follow if European allies take action first, indicating a strategy to avoid risks [1] - European Commission President Ursula von der Leyen responded firmly, stating that the EU will make independent decisions based on its own interests, rejecting the notion of being a pawn for the U.S. [1] Group 2 - The recent trade agreement between the EU and the U.S. has been criticized as imbalanced, requiring the EU to eliminate tariffs on U.S. industrial goods and commit to purchasing significant amounts of U.S. energy products [1] - The EU's unusual refusal to comply with U.S. pressure may stem from a growing realization of being treated as expendable by the U.S. despite making significant concessions [3] - Von der Leyen faces political pressure, with 75% of Europeans calling for her resignation, prompting a reassessment of the EU's policy towards the U.S. [3] Group 3 - The EU is reflecting on its relationship with China, recognizing the importance of the Chinese market for European industries, such as automotive and luxury goods [3] - Recent anti-dumping investigations initiated by China against EU products highlight the potential repercussions for EU industries if they align with U.S. pressures against China [6] - The current geopolitical landscape emphasizes the urgency for the EU to achieve strategic autonomy, impacting its future development and the global multipolar order [6]

Group 1 - The French government is considering a 2% wealth tax on individuals with assets exceeding 100 million euros to reduce the fiscal deficit, referred to as the "Zucman tax" by the media [1][3] - Bernard Arnault, chairman of LVMH and France's richest person, criticized the proposal, labeling economist Gabriel Zucman as a "pseudo-scholar" aiming to "destroy the French economy" [1][3] - The proposed tax has faced opposition from right-wing politicians who fear it may lead to wealthy individuals leaving France [3] Group 2 - Arnault's current personal wealth is reported to be $157 billion, according to Forbes [4] - The previous French Prime Minister, Édouard Philippe, announced a budget plan to cut public spending by 43.8 billion euros, which included controversial measures such as changing public holidays to workdays [4] - Following a failed confidence vote regarding fiscal policies, the former Prime Minister resigned, and Sébastien Lecornu was appointed as the new Prime Minister [4]

Group 1 - Luca de Meo officially assumes the role of CEO of Kering Group, marking a significant governance restructuring and the separation of the roles of Chairman and CEO [1][3] - The appointment was initiated on June 16, with a shareholder meeting on September 9 approving the new governance structure and compensation policy for de Meo, which includes a fixed salary of €2.2 million, a potential bonus of up to €1.21 million by 2025, and a signing bonus of €20 million [1][2] - The age limits for the Chairman and CEO positions have been extended to 80 and 70 years respectively, providing institutional support for a stable transition in management [1] Group 2 - De Meo outlined his strategic direction, focusing on deleveraging and cost reduction, with potential brand restructuring and positioning adjustments, while also expanding product and business areas [2] - Kering's financial performance showed a 16% year-on-year decline in overall revenue to €7.587 billion, with core brand Gucci experiencing a 25% drop in comparable sales, impacting overall profitability [2] - The governance change aligns with best practices for large public companies, with de Meo taking full responsibility for daily operations while François-Henri Pinault focuses on his role as Chairman [3]

Group 1: Economic Indicators - The U.S. August Consumer Price Index (CPI) rose to 2.9% year-on-year, the highest level in seven months, up from 2.7% in the previous month [4] - The core CPI, excluding volatile food and energy prices, remained stable at a year-on-year increase of 3.1% [4] - Initial jobless claims reached 263,000, the highest level in nearly four years, prompting increased bets on potential interest rate cuts by the Federal Reserve [1][4] Group 2: Market Reactions - Following the inflation data release, traders increased their bets on at least two interest rate cuts by the Federal Reserve by the end of the year, with a possibility of three cuts [1] - The 10-year U.S. Treasury yield fell below 4% for the first time since April [1] - Major U.S. stock indices reached historical highs, with the Dow Jones Industrial Average closing up 1.36% and surpassing 46,000 points for the first time [1] Group 3: European Economic Developments - The European Central Bank (ECB) decided to keep key interest rates unchanged for the second consecutive time since June, while raising the eurozone economic growth forecast to 1.2% [7] - The ECB President indicated that the process of combating inflation in the eurozone has concluded, and trade uncertainties have significantly decreased [7] - European stock indices all rose, with the UK FTSE 100 up 0.78%, France's CAC40 up 0.80%, and Germany's DAX up 0.30% [7] Group 4: Commodity Market Trends - International oil prices fell, with light crude oil futures closing at $62.37 per barrel, down 2.04% [9] - U.S. crude oil inventories increased by 3.9 million barrels, contrary to expectations of a decrease, raising concerns about weak demand [8][9] - Gold prices experienced a slight decline, with December futures closing at $3,673.6 per ounce, down 0.23% [11]

Core Insights - Luxury brands are introducing more affordable products to maintain brand relevance and attract new consumer groups amid rising prices and economic pressures [1][3][5] - The launch of Louis Vuitton's beauty line, featuring high-priced items like a $160 lipstick, reflects a broader trend in the luxury sector to diversify offerings without compromising core high-end product lines [1][2] - The strategy aims to engage "aspirational consumers" who desire luxury goods but may not currently afford them, thereby expanding the customer base [1][4][5] Industry Trends - Several luxury brands, including Prada and Celine, have already ventured into the beauty sector, which is noted for its high profit margins [2][3] - The rise of "treatonomics" indicates that consumers are willing to spend on smaller luxury items even as they cut back on larger purchases [2][3] - The luxury market has faced challenges since 2022, including rising costs and consumer dissatisfaction with high prices, prompting brands to adapt their strategies [3][4] Strategic Approaches - Brands are leveraging lower-priced entry products to attract younger consumers, with the expectation that these consumers will develop brand loyalty over time [4][5] - LVMH's CFO emphasized the importance of connecting with younger generations through accessible products while maintaining high quality and brand prestige [5][6] - Balancing the introduction of lower-priced items with the expansion of high-end product lines is crucial to avoid diluting brand exclusivity [5][6] Consumer Behavior - Young consumers are increasingly focused on luxury brands, driven by cultural influence and online engagement, which is expected to support long-term demand as their purchasing power grows [4][6] - The sensitivity of "aspirational consumers" to economic conditions suggests that sustainable growth in luxury spending will depend on broader economic recovery [6]

Group 1 - The Kering Group held a General Meeting with key executives and board members present, including the Chairman and CEO Francois-Henri Pinault [1][2] - Luca de Meo is expected to join the Board of Directors and be appointed as Chief Executive Officer [2] - The Bureau for the General Meeting was established, with the two largest shareholders, Artémis and Amundi, represented [3] Group 2 - Eric Sandrin, the Legal Director and Corporate Secretary, was appointed as Secretary for the General Meeting [3][4] - The agenda and legal implications of the meeting were to be discussed by Eric Sandrin [4]

Group 1: Airline Industry - In early 2025, there were many empty seats on flights to Europe, even during the peak travel season, indicating a decrease in business travel due to a sluggish global economy [2][4] - The number of flights landing at Beijing's T3 terminal has significantly decreased, with the once-busy Frankfurt route not being restored by Lufthansa, likely due to unprofitability from reduced business passenger traffic [4][5] Group 2: Wine and Spirits Industry - LVMH's wine and spirits division saw an 8% decline in revenue and a 33% drop in operating profit in the first half of 2025, marking it as the worst-performing segment of the group [5] - Many Chinese-owned wineries in France are struggling to sell their products, with Bordeaux classified growth wines being offered at discounts of over 30%, a rare occurrence in previous years [5][7] - The trend of selling wineries at lower prices is expected to continue, as many are currently on the market at attractive prices [7] Group 3: Luxury Goods Market - In early 2025, nearly 20 luxury brands closed stores in China, with Beijing being particularly affected, as foot traffic at high-end shopping locations like SKP decreased significantly [9] - LVMH reported a 4% decline in revenue in the first half of 2025, with its fashion and leather goods segment experiencing a 7% organic revenue drop and an 18% profit decline [9] Group 4: Consumer Behavior Trends - The consumption of luxury goods, including high-end wines, is no longer seen as essential, leading to decreased sales in these categories [11] - There is a growing trend in Europe towards smaller, more affordable wine packaging, such as mini bottles and aluminum cans, reflecting a shift in consumer preferences towards cost-effective options [12][15] - The market for low-alcohol and zero-alcohol wines is expanding rapidly in Europe, while Chinese wineries lag behind in adapting to these trends [17][19] Group 5: Market Adaptation - Wineries in the Helan Mountain East region need to embrace market changes and innovate to remain competitive, as seen in successful low-cost, high-value products in other markets [21]

Core Viewpoint - The global luxury goods industry is facing significant challenges, potentially experiencing its largest setback in 15 years, as indicated by Bain & Company. Despite this, Hermès continues to show growth, although it faces increasing difficulties in customer acquisition and reliance on leather goods [4][6]. Financial Performance - Hermès reported an 8% revenue growth to €8 billion, with all geographic regions showing growth, except for the perfume and beauty and watch sectors [4][5]. - In the first half of 2024, Hermès achieved a 15% growth, with double-digit growth across most regions, except for a slight decline in the watch sector [5]. Market Challenges - The company is struggling with the challenge of attracting new customers and is affected by the second-hand market disrupting pricing strategies. The reliance on leather goods is becoming increasingly problematic [6][20]. - The second-hand market has shown that Hermès products can sell for more than retail prices, indicating a strong demand but also a shift in consumer purchasing behavior [12][14]. Sector Performance - The leather goods sector saw a revenue increase of 12.4%, while the ready-to-wear and silk sectors experienced a decline in growth rates, with ready-to-wear growing only 5.5% compared to 15.5% the previous year [21]. - The perfume and beauty sector saw a decline of 3.8%, while the watch sector dropped by 7.9% [21]. Geographic Performance - The Americas market is becoming increasingly important for Hermès, with a 9.5% growth in the first half of 2025, while the Asia-Pacific region only grew by 1.5% [30][31]. - Growth in Japan has slowed from over 22% in 2024 to 16% in 2025, and the overall growth in the Asia-Pacific region has significantly decreased compared to previous years [30][31]. Pricing Strategy - Hermès plans to continue raising prices globally, but has already implemented a 5% price increase in the U.S. to counteract tariff impacts [28][29]. - The company is facing pressure to adjust its pricing strategy due to rising costs of raw materials, particularly in the jewelry sector [33]. Future Outlook - The importance of diversifying product lines is emphasized, as reliance on leather goods may not sustain the company in the long term. The company is looking to expand into high-end fashion to create a second growth curve [24][34]. - The decline in middle-class consumers willing to spend on entry-level products poses a risk to Hermès' customer base [36].