LVMH and Kering Are “Back on Track” as China’s Consumer Recovery Boosts Luxury Giants

TradingKey - On growing optimism about an improvement in China’s consumer market, HSBC upgraded luxury giants LVMH (MC.PA) and Kering (KER.PA) — parent company of Gucci — from Hold to Buy, boosting both stocks more than 4% in early Tuesday trading on European exchanges.

On Tuesday, September 2, LVMH and Kering led a broader rally in European luxury stocks, with Goldman Sachs’ luxury basket rising 2.4%.

In its latest report, HSBC stated:

“After a difficult period, we believe it is time to be more optimistic about the luxury sector.”

HSBC forecasts a slight sales rebound in the second half of 2025, with profitability and solid growth returning in 2026. While U.S. consumers may face short-term headwinds in Q4, the bank expects Chinese consumer engagement to rise meaningfully, with both markets driving stronger sales growth next year.

The bank highlighted that LVMH has opportunities to simplify its cost structure and achieve higher long-term profit margins, particularly through a recovery in Dior sales and improved cost controls.

In Q2 2025, the world’s largest luxury group reported total revenue that fell short of Wall Street expectations, hit by macroeconomic uncertainty including tariffs and weak demand in Asia. Its largest segment, Fashion & Leather Goods — which includes Louis Vuitton, Dior, Celine, and Fendi — saw organic revenue decline 9%, the worst performance across all divisions.

For Kering, the arrival of new CEO Luca de Meo brings renewed optimism. The leadership change could reduce investor concerns and lower the stock’s perceived risk.

Similarly affected by economic and geopolitical uncertainty, Kering reported a 18% drop in Q2 revenue and a 46% decline in net profit, with significant pressure on sales in its two largest luxury markets: China and the U.S.

Recently, China has rolled out multiple stimulus measures, which have not only driven its stock market to multi-year highs but also benefited multinational corporations’ operations in the country. After China’s “policy package” announcement in late September 2024, LVMH, Hermès, and Kering all surged about 9%.