Luxury stock investors are facing the risk of more bad news as the likes of Burberry Group Plc and Hugo Boss AG fell short of already reined-in expectations and economic data from China dents chances of a near-term rebound.
When Richemont SA releases its third-quarter sales results, it will provide new information on how luxury businesses are handling a downturn in the industry’s growth. This week, Investec Plc downgraded the Cartier owner’s rating, which comes after the industry leader LVMH had at least six downgrades in the second half of last year.
A quarter of the estimated € 362 billion global market is made up of Chinese consumers, whose lacklustre economic growth statistics have heightened concerns about the demand for luxury products and caused an overall decline in the European sector.
In addition, the negative reaction to disappointing releases in the past week from Burberry and Hugo Boss showed that markets haven’t been primed for the full extent of the industry’s woes.
Investors anticipate that the start of this year will compare particularly poorly with the initial excitement of 2023, when the reopening of China spurred a spending spree on expensive jackets and high-end watches, briefly elevating LVMH’s worth above $500 billion.
Since September, the majority of brokers have reduced their projected earnings by more than 5 per cent, with the industry’s future remains uncertain and dependent on the ongoing weakness of the global economy.
According to analysts, ambitious buyers are getting more concerned about price rises as the demand for luxury goods declines throughout the Christmas season.
Given the continued high demand for its highly sought-after handbags, which can fetch prices ranging from over € 8,000 to tens of thousands of euros, Hermes in particular has demonstrated less vulnerability than its competitors.
