Steer clear of European luxury stocks, says RBC, as Citi upgrades the sector

  • 📰 MarketWatch
  • ⏱ Reading Time:
  • 46 sec. here
  • 2 min. at publisher
  • 📊 Quality Score:
  • News: 22%
  • Publisher: 97%

Business News News

Business Business Latest News,Business Business Headlines

European luxury groups face a number of headwinds says RBC analyst. But Citi disagrees.

The sector did very well at the start of the year, helping push the luxury-rich CAC 40 FR:PX1 index in France to a record high in April, as companies including LVMH MC, -0.68% and Hermes International RMS, -0.92% saw their share prices peak.

First off, he perceives the end of the current luxury supercycle. The market size is now roughly 24% above 2019 levels, he notes, with recent growth rates above average for most of the companies RBC covers. “This is not sustainable, and we expect moderating revenue growth trends from here,” Dadhania says.

Finally, macro-economic headwinds such as higher non-discretionary costs like rent and mortgages are the worst in decades, RBC reckons. This means the aspirational consumer, which RBC believes number roughly 165 million globally, and which have been an important driver of luxury demand, are “less visible today,”

“LVMH offers the best downside protection on margins in our view, whilst Kering is our preferred turnaround idea at an attractive valuation. We also upgrade EssilorLuxottica EL, -1.73% to sector perform. In sporting goods, we prefer Puma PUM, +0.48%, ” says Dadhania.

 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.
We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 3. in BUSİNESS

Business Business Latest News, Business Business Headlines