Company Reports

We are maintaining our fair value estimate of EUR 47.50 for narrow-moat Moncler as the company delivered a resilient performance in the first half despite a broad industry slowdown. We see shares as somewhat expensive at current levels.

Moncler’s leadership position in a growing and conspicuous down jacket category, strong pricing power, and control over distribution should allow the company to generate economic profits over the medium to long term, granting it a narrow moat.

We are maintaining our fair value estimate of EUR 47.50 for narrow-moat Moncler as the company reported strong first-quarter revenue trends, especially for its core Moncler brand, defying the industry slowdown. Still, at 27 times forward consensus earnings, shares look expensive.

We are maintaining our fair value estimate of EUR 47.50 for narrow-moat Moncler as the company reported full-year sales and profits slightly ahead of our expectations on the back of a strong fourth quarter.

Moncler’s leadership position in a growing and conspicuous down jacket category, strong pricing power, and control over distribution should allow the company to generate economic profits over the medium to long term, granting it a narrow moat.

Narrow-moat Moncler reported a sales slowdown during the third quarter, with revenue growth for the group at 7% from 26% during the second quarter and 23% during the first quarter. The slowdown was mainly due to a challenging year-on-year comparison and a decline in the wholesale channel's performance, especially within the Americas region. During the earnings call, management also highlighted the presence of unusual warm weather in the September to October period. The market reacted negatively to the results, with a 6% decline at the time of writing. However, our model already considers normalization of growth for the year, so we don't expect to make a material change to our fair value estimate of EUR 47.5. Shares remain in 2-star territory.

We increase our fair value to EUR 47.50 for narrow-moat Moncler after it reported strong first-half results and we adjust our full-year assumptions slightly upward. Moncler fared better than most previously reported peers in the second quarter, with 32% constant-currency growth (21% for the LVMH fashion and leather division and 24% for Richemont’s Jewellery Maisons) due to a very strong performance in Asia with 55% constant-currency growth (30%-40% for previously reported peers) and Europe (30% versus a 10%-20% range for peers). Revenue in the Americas declined 5% for the brand due to the Nordstrom business conversion from wholesale; excluding this impact on growth in the Americas would have resulted in a positive low single digit in the quarter, which is ahead of peers who mostly declined in this market. Sales to Chinese consumers globally are over 50% higher than in 2021, unaffected by lockdowns.

Moncler’s leadership position in a growing and conspicuous down jacket category, strong pricing power, and control over distribution should allow it to generate economic profits over the medium to long term, granting it a narrow moat.

We are increasing our fair value estimate for narrow-moat Moncler to EUR 46 per share from EUR 41 to factor in strong 2022 results and higher expectations for 2023 growth.

Moncler’s leadership position in a growing and conspicuous down jacket category, strong pricing power, and control over distribution should allow it to generate economic profits over the medium to long term, granting it a narrow moat.

We don’t expect to materially change our EUR 41.50 fair value estimate for narrow-moat Moncler as the company reported full-year results a bit ahead of our and consensus estimates. Revenue came in at EUR 2.6 billion and operating profit at EUR 774.5 million, both around 4% higher than our estimates. Operating margin reached 29.8%, up 30 basis points from the prior year and matching our forecasts. Both Moncler brand and Stone Island brand revenue exceeded expectations.

Moncler’s leadership position in a growing and conspicuous down-jacket category, strong pricing power, and control over distribution will allow it to generate economic profits over the medium- to long term, granting it a narrow moat rating.

We are maintaining our fair value estimate for narrow-moat Moncler as the company reported a marked slowdown in third-quarter revenue trends, even despite fewer headwinds from lockdowns in China compared with the second quarter. We still view Moncler as one of the few expensive stocks in our luxury coverage and would wait for a better entry point to invest.

Moncler’s leadership position in a growing and conspicuous down-jacket category, strong pricing power, and control over distribution will allow it to generate economic profits over the medium- to long term, granting it a narrow moat rating.

We expect to increase our fair value estimate for narrow-moat Moncler by a mid- to high-single-digit percent to account for higher expected revenue and profitability in 2022 after the company reported very strong first-half results despite lockdowns in China. We note that the second half of the year has much more meaningful contribution to revenue (70% in 2021) and could still be affected by macroeconomic weakness.

Moncler’s leadership position in a growing and conspicuous down-jacket category, strong pricing power, and control over distribution will allow it to generate economic profits over the medium- to long term, granting it a narrow moat rating.

We are increasing our fair value estimate for narrow-moat Moncler from EUR 27 per share to EUR 37.50 per share to account for our higher revenue growth expectations for the group of 7.7%, with 6.5% growth for the Moncler brand over the next 10 years and 14.5% for Stone Island. This compares with our 5.5% growth expectations for the luxury industry and factors in lower maturity of these brands versus bigger competition (Moncler is still adding stores at mid-single-digit pace with notable white spaces in the U.S., while Stone Island has long runway for increasing retail penetration of the business). We also increase our operating margin assumptions to low-30% versus 28.3% in 2021 and high-20s in our prior model. We believe that operating leverage inherent to the business would be dampened by investments in store expansion and marketing to promote both brands (but especially Stone Island).

Moncler’s leadership position in a growing and conspicuous down-jacket category, strong pricing power, and control over distribution will allow it to generate economic profits over the medium- to long term, granting it a narrow moat rating.

We are not making any changes to our fair value estimates for our luxury and apparel coverage list due to Russia-Ukraine armed conflict. The luxury industry’s exposure to the Russia and Ukraine is small, accounting for a low-single-digit percentage of revenue, by our estimates. We believe that the conflict is unlikely to dampen consumer confidence in China (primary long-term growth driver) or the U.S. (driver of growth in recent years). European consumer sentiment (low-20% of industry’s sales) may be affected, should energy-related inflation accelerate meaningfully as a result of conflict; however, Morningstar's view is that the likelihood of gas delivery disruption to Europe from Russia is low. That said, most luxury names in our coverage look expensive to us, and we would recommend investors await a wider margin of error for investment in the sector.

We expect to increase our fair value estimate for narrow-moat Moncler by a high-single-digit percentage, as the company reported strong full-year results, above our expectations. At 30 times consensus forward earnings, shares remain expensive in our view.