CDW Corp +1.6%

CDW’s Q125 results came in ahead of expectations, led by a strong performance in Client Devices (20%+ year-on-year (yoy)) as it benefited in part from demand pull-forward, particularly in the Education vertical, which was partially offset by sluggish trends for Infrastructure as some large projects were paused. That said, the mix headwind associated with the Hardware portfolio was somewhat offset by solid trends in both Software (+10% yoy) and Services (+14% yoy).

While management noted underlying demand continued to trend healthy into Q225, it cautioned that customers were incrementally more cautious given the state of the macro, including higher scrutiny on government and educational spending, leading the company to take a prudent view for its outlook. The net result was the reiteration of the guidance for the full year — implying a somewhat stronger H125 relative to prior expectations, and prudence embedded into the second-half expectations. Within that demand backdrop for 2025, CDW is guiding gross profit and earnings to expand at a low-single-digit growth rate.

With shares of CDW recently trading as low as <15x earnings heading into the results (versus historical average of 19x+), it was not surprising to see the positive reaction on the Q125 beat and full-year reiteration, particularly with the muted investor sentiment in recent months.

LVMH -30.1%

As the first luxury company to report Q125, LVMH’s ~4% revenue miss set a negative tone for the reporting season of the luxury goods companies globally. The Q1 sales performance, both at group and the Fashion & Leather division’s level, was overall below the most conservative expectations. With US (and global) economic uncertainty remaining highly elevated, it is difficult to build a credible scenario of sequential revenue improvement in the coming quarter for LVMH and the luxury sector at this stage.

That said, the long-term demand dynamics remain for the industry. Looking at the longer-term revenue development of the sector, organic revenues have grown at 9% per annum since 2005 (16-year period). What is perhaps more surprising is the stability in the annual rate of growth over the long and also medium term.

Over the course of the past decade, luxury companies have launched products in new categories, or significantly grown under-developed categories. The most popular categories for product extension include: (1) casual apparel & streetwear; (2) beauty, including bath & body adjacencies; (3) homeware and décor; (4) eyewear; (5) pet accessories; (6) fitness equipment etc. These new product categories have allowed for brand growth without saturation of core products. Ultimately, brands are able to capture a greater share of the consumer’s discretionary wallet through these new products.