Luxury benefitting from China stimulus, headwinds remain
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LUXURY BENEFITTING FROM CHINA STIMULUS, HEADWINDS REMAIN
Luxury stocks are surging in Europe on Thursday on hopes that stimulus in China can reboot demand for the ailing sector, but RBC believes challenges are likely to persist through the end of the year with Q3 earnings reports on the horizon.
The STOXX Europe Luxury 10 .STXLUXP is up over 4.5%, taking the weekly gain to over 8%, its biggest one-week rise since January, but there are hurdles to overcome when reporting season kicks off according to RBC.
"The sector is facing more headwinds in 3Q24 such as lack of traffic in-store/online, moderating travel trends into Europe and Japan (due to JPY appreciation) and China macro/micro deterioration," RBC analysts write in a note.
"Existing challenges including higher prices, spend rotation into experiences and indigestion of over-consumption have not yet fully resolved either."
Earnings expectations for FY2025 have been "significantly lowered" writes RBC, but they still expect one more leg down ahead of FY2024 reporting as expectations remain "slightly elevated".
On a company basis, RBC prefers LVMH and Watches of Switzerland across luxury coverage, while they expect a robust top-line performance for Pandora and EssilorLuxottica in Q3 results.
Europe's largest luxury goods company LVMH kicks off Q3 earnings for the sector when it reports on October 8.
(Samuel Indyk)
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FOR THURSDAY'S OTHER LIVE MARKETS POSTS
UBS SEES ROOM FOR STRONGER NORWEGIAN CROWN CLICK HERE
ECB OCTOBER CUT HANGS IN THE BALANCE CLICK HERE
EUROPE'S CHINA-EXPOSED STOCKS TURBOCHARGED ON STIMULUS HOPES CLICK HERE
CHINA GIVES MARKETS ANOTHER REASON TO CHEER CLICK HERE
EUROPEAN FUTURES BOUNCE AS CHINA STIMULUS OPTIMISM PERSISTS CLICK HERE
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