MONC Moncler SPA

--Results reassured investors, easing fears of waning Chinese demand

--Soft-luxury players did better than companies selling watches and jewelry

--Results helped boost stock prices but investors remain cautious

By Cristina Roca

European luxury earnings wrapped up this week with Hermes's results. Here are some observations and analyst comments:

SOFT LUXURY OUTPERFORMED HARD

Most players in the luxury leather goods, clothing and accessories market saw unexpectedly resilient demand in the fourth quarter, Citi analyst Thomas Chauvet said. "Key demand drivers are still in place to support healthy (albeit normalizing) growth" going forth, he said.

Many of these soft-luxury players have been outperforming hard-luxury peers peddling high-end jewelry and watches for the past few years because they have been more agile in adapting to changing markets, Mr. Chauvet said.

Brands like Kering's (KER.FR) Gucci have worked to create entry-level products to attract new customers, for example by making a smaller, lower-priced version of a popular bag, he said.

Kering's "scientific and increasingly data-driven approach to running brands" should also be credited for Gucci's success alongside product and creativity, Deutsche Bank's Francesca DiPasquantonio said.

Other soft-luxury companies like LVMH Moet Hennessy Louis Vuitton SE (MC.FR) also benefited from investment in digital, HSBC said.

Hard-luxury companies had less buoyant results, being more sensitive to macroeconomic uncertainty and currency moves, Mr. Chauvet said. Buyers may choose to hold off on big-ticket purchases until currencies are more favorable, he added.

REASSURING START TO THE YEAR

Most luxury companies pointed to demand holding up in early 2019, including LVMH, Moncler SpA (MOV.MI), and Hermes International SCA (RMS.FR). Prada SpA (1913.HK) and Salvatore Ferragamo SpA (SFER.MI), both in the midst of efforts to turn around top-line momentum, said like-for-like sales were positive.

Kering management said January trading was broadly in line with the fourth quarter for Gucci and demand for the label held strong with Chinese and American customers, reassuring investors who were concerned over whether Gucci could sustain its appeal, Mr. Chauvet of Citi said.

After months of uncertainty on Chinese consumption, current trends and macro indicators look far more encouraging, Bryan Garnier analysts said.

"We have the feeling that the first months of this year were quite robust in Mainland China," they said.

STOCKS REBOUNDED BUT INVESTORS REMAIN CAUTIOUS

Earnings supported good sentiment for the luxury sector and stocks' valuations have returned to high levels, Berenberg analysts said, adding however that this leaves little room for error if conditions deteriorate, notably in China.

Mr. Chauvet differed, saying that although the luxury sector as a whole is now up 17% year-to-date, its valuation isn't above its historical average. To a large degree, the rise in luxury stocks was just the recovery from the troughs of last autumn, when fears of a sharp slowdown in Chinese demand triggered a sell-off, he said.

Moncler--a maker of high-end down jackets--got the biggest boost from earnings, rising 11% after the Italian company reported substantial fourth-quarter growth, and said it was particularly satisfied with China. Even with its shares trading at a premium, Moncler appeals to investors as it looks like a safe bet while the broader market turns more challenging, Jefferies analyst Flavio Cereda said.

This season's reporting showed that the concerns about a "hard landing" in China that gripped the market during the second half of last year were overdone, Mr. Chauvet said. But the market may need more time to confirm the trend, Mr. Chauvet said.

Write to Cristina Roca at cristina.roca@dowjones.com

(END) Dow Jones Newswires

March 21, 2019 12:16 ET (16:16 GMT)

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