Luxury Industry Facing 'Long-Term Slowdown,’ Says UBS

Insights - European luxury brands have experienced significant success in the past two years, often likened to the U.S. tech giants known as the "Magnificent Seven." However, the sector has faced challenges in the last six months.

Kering and Hugo Boss have seen their market values nearly halved, while Burberry has experienced a 70% decline, leading to its removal from the FTSE 100 index. LVMH has fallen from the top spot among European companies by market value to second place.

Source：zerohedge

Luxury firms are expressing uncertainty about their earnings outlooks. Kering, Burberry, and Hugo Boss have issued profit warnings, and LVMH reported only 1% organic revenue growth in its key leather goods division, down from 21% a year ago.

Source：Bloomberg

UBS analyst Zuzanna Pusz describes the luxury-sector outlook as “slower for longer, ”leading to lower expectations for sales growth in the second half of this year and in 2025.

Morgan Stanley's Edouard Aubin noted that LVMH and Richemont are particularly vulnerable to economic downturns, prompting him to lower their target prices.

However, some analysts contend that current stock valuations are more justified, offering investors a favorable entry point into the market.

Morningstar analyst Jelena Sokolova believes the luxury sector has long-term advantages, and this downturn may present a good investment opportunity, especially for Kering and its brand Gucci.