Europe’s beleaguered luxury sector could see a turnaround in fortunes this year, as early indicators point to an improvement in consumer spending and a move away from China. Luxury stocks soared in trading last week after Cartier owner Richemont reported “highest ever” quarterly sales for the three months to December, reflecting strong consumer demand during the Christmas period. It has shown signs of recovery, and analysts believe this trend could continue until 2025. Swiss luxury stocks rose 16% on the day, with fashion giants LVMH, Hermès, Kering, Moncler and Burberry. The earnings upside is seen as a positive early signal ahead of broader fourth-quarter announcements from a sector plagued by weak consumer spending, particularly in the all-important Chinese market. “There’s definitely an element in Richemont’s numbers that is attributable to an improving cyclical demand environment,” Luca Solca, Bernstein’s managing director and head of global luxury goods, told CNBC by phone on Friday. spoke. “This is clearly going to be the tide that lifts all boats,” he said of improving global macroeconomic conditions. “Expectations are rising for other companies as they prepare for this quarter’s earnings announcements,” UBS said in a note Friday. However, BofA Global Research said the improving economic environment was unlikely to be a silver bullet for all businesses and said the year ahead would be a game of “snakes and ladders.” “The luxury goods industry will experience many ups and downs in 2025,” the analysts wrote in a note Thursday. LVMH, Kering and Hermès also on the horizon Investors are currently focusing on the fourth-quarter results of Europe’s biggest luxury brands. LVMH, which owns brands such as Louis Vuitton and Moët Hennessy, will provide a key indicator for the handbag and leather goods sector, which has seen even steeper price increases in recent quarters. BofA said LVMH was likely to emerge as one of the sector’s top performers when it releases its report at the end of the month, along with Richemont, while UBS said in a Jan. It is considered neutral. But Bernstein’s Solca was less optimistic, noting that the company’s problems were “protracted” after reporting in October that quarterly sales fell for the first time since the pandemic. “LVMH’s numbers may be better than in the third quarter, but they are definitely not as good as Richemont,” Solka said. MC-FR KER-FR, RMS-FR 1Y Line European Luxury Stocks Kering, whose stock price plummeted in 2024 due to repeated profit warnings, is expected to continue underperforming its peers as it embarks on a strategy to improve its brand. -Gucci brand of fashion. Bernstein highlighted the challenges to the company’s “Gucci makeover” vision, especially given Gucci’s dependence on the Chinese market. Meanwhile, Hermès has successfully cornered the top end of the market, with sales up 11% in the third quarter due to continued demand for Birkin-specific handbags, and is expected to continue to outperform in the sector. are. Both UBS and Bernstein said they were positive on the stock, with the latter expecting double-digit sales growth in 2025. The effects of the recession and recent stimulus packages remain to be seen. But instead, a new wave of affluent American consumers has emerged, with gains from the election of President Donald Trump leading to higher stock prices, a stronger dollar and stronger cryptocurrencies to fuel festive spending. Richemont’s U.S. growth doubled in the third quarter to 22%, but the Asia-Pacific region fell 7%, mainly due to a decline in China. The group’s 19% growth rate in Europe was also driven primarily by tourist spending from North America. Analysts say the North American market is likely to become a key target for brands in 2025, with BofA predicting U.S. shoppers will account for more than 50% of the sector’s overall revenue growth this year. states. Meanwhile, Bernstein in November lowered his forecast for China’s luxury spending in fiscal 2025 to low single digits. “After 10 quarters of weakness, there are (fragile) green shoots in U.S. luxury spending,” BofA said. The threat of renewed U.S.-China tensions under the new Trump administration could accelerate that change, with new tariffs likely to hit China’s economy hardest and accelerate currency fluctuations. “If President Trump introduces new tariffs, it will continue to be difficult[for China]which is why luxury goods companies are definitely more interested in the U.S. than in China,” Solka said. . A return to creativity Meanwhile, analysts say luxury brands will signal a return to a more luxurious aesthetic in future statements, after a period of understated “quiet luxury” style led to dilution for some brands. It is said that this can be expected. “[Quiet luxury]has lowered the barrier to entry,” BofA writes. “The industry needs to get back to creativity, fashion content and newness,” Solka agreed, adding that certain brands that have alienated consumers in recent years with sky-high prices and overly simple aesthetics. He pointed out that a certain amount of “atonement” was necessary. “We’re probably at or nearing the end of this quiet luxury trend, but a more fun aesthetic will soon prevail,” he said.
The Louis Vuitton store on the Champs-Elysées in Paris is decorated for the Christmas season.
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Europe’s beleaguered luxury sector could see a turnaround in fortunes this year, as early indicators point to an improvement in consumer spending and a move away from China.
