Investing.com — Weakening Chinese consumer demand, slowing travel spending and an uncertain U.S. economic outlook are likely to be the main headwinds facing the luxury industry in the second half of the year, according to analysts at Jefferies.
Analysts said in a client note on Friday they expect “no notable improvement” in sales for luxury goods companies in the second half of 2024, noting that demand in the first half was “flat.”
Meanwhile, the industry now expects 2025 sales to be 3% lower than the recent consensus forecast, due to an expected economic slowdown in Asia-Pacific, fuelled by a weaker Chinese economy, which is expected to offset a recovery in growth in the US and Europe next year.
Analysts then cited LVMH and Kering (EPA:). Burberry, the British brand known for its checked items, and watchmaker Swatch were also downgraded to “underperform” from “hold” by Jefferies.
However, analysts said they expect “strong earnings resilience” from sports-car maker Ferrari (NYSE:) and raised their price target for the company.
The comments came after analysts at JPMorgan Chase & Co. (NYSE:) earlier this month warned of the risk of a second tariff war after November’s U.S. presidential election and slowing growth in the world’s second-largest economy, and removed their “buy” ratings on Chinese stocks.
Reports that LVMH-owned Tiffany & Co. was scaling back its flagship store in Shanghai also exacerbated concerns about China, analysts said. In August, LVMH-owned Sephora also made large cuts to its workforce in China.
LVMH is known as a bellwether for the luxury goods industry. In July, the company reported that second-quarter demand was weaker than expected, causing sales in Asia excluding Japan (which includes China) to fall 14%. But the company added that it expects “ease in comparatives” in the second half of the year, which it hopes will lead to “stronger growth.”
