City broker downgrades outlook for luxury stocks LVMH, Burberry and Richemont
City broker Deutsche Bank has downgraded the target share price for a host of luxury companies as the impact of Trump’s tariffs starts to filter through analyst forecasts.
The broker rated Richemont, LVMH, Moncler and Kering a ‘Hold’, downgrading the share price for each company.
“The direct impact of the tariffs is not a huge headwind in our view… However, weaker global stock markets and the broader economic uncertainty will weigh on confidence and we see this further postponing a recovery in luxury demand,” analysts said.
Hermes was the only company to receive an upgrade, with Deutsche Bank changing its recommendation from a ‘Hold’ to a ‘Buy’ and increasing the target share price from €2,220 to €2,550 (£1,911 to £2,195).
Consumer discretionary analyst at Quilter Cheviot Mamta Valechha said Hermes would benefit from its “strong pricing power and higher-end positioning” despite the inevitable single-digit price increases.
“However, how the US (and global) luxury consumer responds to potentially reduced global economic growth remains unknown,” Valechha added.
There was a significant sell-off in luxury markets after Trump announced tariffs on April 2.
Burberry, Kering, and LVMH have dropped 16.6 per cent, 16.2 per cent 12.5 per cent, respectively, since April 2.
Traditionally safe bets Hermes and Ferrari have dropped 8.5 per cent and nine per cent, respectively.
Analysts had been pricing in a luxury rebound after the cost-of-living crisis in Europe and a downturn in China created a market slump in 2023.
“It is no longer clear that the third quarter of 2024 was the nadir for luxury demand,” Deutsche Bank analysts said.
“The luxury recovery in the fourth quarter now looks likely to be the anomaly and not the trend.”
Deutsche Bank lowered its outlook for the entire luxury sector for 2025 by three percentage points, to two per cent growth.