HSBC said on Tuesday it now expects organic growth for the global luxury sector to reach 2.8% in 2024, down from a previous forecast of 5.5%, citing concerns about a weak macro environment and a recent wave of downgrades.
“We no longer expect a return to double-digit growth in the third and fourth quarters, even though there is now a much easier basis for comparison,” the investment bank said in a report titled “Brutal Summer.”
That means 2024 is expected to be the “sixth worst year in the past 20 years,” behind 2020, 2009, 2016, 2008 and 2015.
Until Tuesday, HSBC had only a “buy” recommendation on Prada Group, but upgraded Moncler to a buy recommendation, saying “the brand should benefit from the coming colder months and, more importantly, from the upcoming impactful Genius event.”
The Italian company has reportedly secured a presence at Shanghai Fashion Week, which kicks off on October 9, and is set to unveil its next Chinese collaboration on October 19.
HSBC lowered its expectations for a range of luxury stocks including LVMH, Kering, Richemont, Burberry, Hermes and Swatch, citing slowing growth mainly in mainland China.
“Given the weaker organic sales momentum than initially expected and the highly uncertain outlook for a potential recovery in luxury sales in China, we have decided to increase our luxury sector beta to 1.1 from 1.0, impacting our target price for the overall luxury market,” the firm said.
According to HSBC, luxury spending remained strong in Japan over the summer due to an increase in Chinese tourists, but the China cluster slowed, the US cluster did not improve as expected, and Europe was mixed.
In Europe, many consumers are adopting a wait-and-see attitude, victims of “greedflation,” a term HSBC uses to describe the sudden price hikes many brands have seen since COVID-19 “not simply as a reflection of inflationary pressures, but simply because they offer an escape route.”
The bank lowered its forecast for the second half of 2024 to 4% from 13% previously.
But there is beginning to be light at the end of the tunnel for the luxury industry.
HSBC said: “We expect growth of 7% in 2025, recovering to high single-digit growth in the first quarter of 2025 and probably double-digit growth in the second quarter of 2025.” “As the outlook for 2025 becomes clearer, December may be a good time to revisit some stocks.”