Luxury: the sector declines, analysts more cautious

Photo credit © Gucci

( — Start of session decline for luxury in Paris with LVMH And Kering which give up 0.5% and 0.8% respectively. Both players were downgraded by Jefferies this morning, with the broker citing risks linked to the slowdown in the United States and the lack of recovery in Chinese consumer spending. Jefferies has therefore lowered its recommendation on the two groups to ‘keep’. Concerning LVMH, it cut its target from 960 to 780 euros while the objective for Kering was reduced from 655 to 500 euros.

The broker’s earnings estimates on luxury businesses for 2024 are about 9% below consensus. “Investors’ nerves are on edge” as the 3rd quarter results approach, with consensus on organic sales and half-yearly Ebit under pressure, according to the broker. A major debate will focus on 2024, where the consensus assumes a return to trend growth, but Jefferies is less optimistic.

Worried about the Chinese engine, Deutsche Bank has also lowered its objectives for the major European luxury players. “Signs of economic pressure in the real estate sector and moderation in sentiment around GDP are likely to weigh on luxury consumer spending, both domestically and abroad,” explains DB. For American and European consumers, the bank continues to count on a normalization of underlying growth in the second half. The broker lowers its target on Kering (‘keep’) from 560 to 510 euros and reduces its focus on LVMH from 835 to 815 euros (‘keep’).


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