HSBC says recovery for European luxury stocks will be even harder in the second half of the year; LVMH and Burberry downgraded

According to analysts at HSBC Holdings, Europe's troubled luxury stocks are unlikely to improve in the near future, as the outlook for the second half of the year appears even more challenging. Industry benchmarks LVMH and Burberry Group continued their recent decline on Wednesday after brokers downgraded both to hold, stating that the French company, as a representative of soft luxury, still faces a difficult market outlook, while the British fashion brand has limited potential upside following its recent transformation efforts. The sector has come under pressure this year, mainly due to weak demand in Asian markets and the impact of the Middle East war on tourist spending. Goldman Sachs Group’s luxury stock basket has fallen by 13% year to date, while LVMH’s price-to-earnings ratio has dropped to its lowest level in a decade. According to the team led by Anna at HSBC, factors that may affect the luxury sector in the coming months include weakening growth momentum in mainland China, negative social media reactions triggered by a trademark dispute between LVMH and Molly Tea, and a slowdown in sales growth in Korea and North America.