European luxury sector faces challenges despite strong performance from LVMH and Kering

The European luxury sector is facing headwinds, with concerns over dwindling demand from China and rising non-discretionary costs, according to RBC. On Monday, RBC scrutinized the industry, noting the end of the luxury supercycle and its potential impact on share prices.

Despite these challenges, they maintained an outperform rating on LVMH and Kering (EPA:), two giants in the industry that have contributed to the FR:PX1 index reaching record peaks. The analysts’ confidence in these companies remains steadfast amidst a challenging macro-economic landscape.

They also evaluated the performance ratings of Richemont, EssilorLuxottica, and Puma, projecting below-consensus earnings for 2024. Their analysis anticipates a decrease in aspirational consumers globally, with numbers expected to drop to around 165 million.

Contrarily, Citi analysts view the European luxury sector as oversold. Despite the challenges highlighted by RBC, this perspective suggests that there may be value opportunities within the sector. However, this contrast in views underscores the uncertainty facing the European luxury market as it navigates through economic pressures and changing consumer behavior.

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