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LONDON – European luxury goods stocks tumbled on Monday as analysts warned of a worsening demand outlook, especially from high-spending Chinese consumers.
German Hugo Boss is one of the worst performing companies Stoke 600 The index fell 4% by midday after Bank of America analysts downgraded the stock to “underperform” from “buy.” They said that the consumption situation will be more severe in the second half of the year and discounts will be stronger.
Analysts at Bank of America Securities wrote in a research report on Monday: “Following the post-COVID-19 consumption peak in 2022, luxury goods industry revenue has continued to slow down. U.S. consumers are the first to return to normal, followed by South Korea, Europe and Japan consumer.
“People of all nationalities are now under pressure as the only industry support – Chinese consumers – fades,” they added. They said luxury consumers were “all sold out”, while China's domestic and Travel demand has “deteriorated”. They expect European luxury goods companies' revenue to fall by 1% in 2024.
Hugo Boss cited “ongoing macroeconomic and geopolitical challenges”, particularly in China and the UK, when it cut its sales outlook in July.
UK stocks Burberry Analysts at Bank of America Securities lowered their target price on the stock to 475 pence ($6.31) from 700 pence, sending the company's shares down nearly 3% on Monday.
They also downgraded the French luxury goods giant LVMH and dry From “buy” to “neutral”.
'Prolonged weakness'
They are not the only ones pessimistic about the European luxury goods industry.
“The problem is clearly China, which over the last decade or so has grown from a very small player in the luxury industry to a huge presence. That's not working right now,” Kepler Cheuvreux told CNBC on Monday. European Road Signs” program.
Challenges in China’s real estate market are weighing on sentiment there, coupled with signs that Cox said Europe's fragility and uncertainty brought about by the U.S. election.
“The luxury goods industry may be in for a long period of weakness; we've seen that for a few semesters. I think most people are hoping that things will improve in the second half of the year – but there's no sign that's going to happen.” It's all in the moment,” he told CNBC.
Cox noted that demand from aspirational buyers and fashion-forward young people looks particularly vulnerable because their consumption patterns can be fickle — a problem for brands such as Burberry that have restructured and tried to reposition themselves. Special challenges.
“Kinging, Burberry, Gucci – if you believe in these brands, they can eventually turn things around, the question is timing,” he said.
“It takes a lot of time, and investors are impatient when there are other well-positioned companies in the luxury space, like Hermès, which we also like. Richemont Group, PradaFor now, for whatever reason, this has captured the imagination of luxury buyers.
Susannah Streeter, head of currencies and markets at Hargreaves Lansdown, highlighted another issue facing luxury goods companies: the possibility of new tariffs from China on the sector.
“Brussels' proposal to impose additional tariffs on Chinese electric cars has raised fears of tit-for-tat action by big brands. These may be sought after by China's fashionistas, but the latest handbag, belt or raincoat is hardly an important part of the Chinese fashionistas' repertoire part.