HSBC sees signs of a turning point for the luxury sector following four challenging quarters, with sales expected to improve in the second half of 2025 and stronger growth returning in 2026. The bank notes particular momentum in the soft luxury segment, where brands have struggled with pricing and creative missteps.
“After four quarters of pain, partly macro driven (FX, recessionary fears, global tensions) but, bluntly, mostly self-inflicted, we see luxury starting to do better in H2 2025 before reverting to more decent growth in 2026,” wrote analysts led by Erwan Rambourg.
HSBC forecasts average sales growth of 3% in the second half, following a 1% decline in Q2. The improvement is expected to be supported by a favorable comparison base in Japan and Europe, recovering sentiment among Chinese consumers, and new product launches at accessible price points.
The analysts also noted that, although U.S. consumers face short-term challenges such as inflationary pressures and a tough post-election comparison, they do not foresee a “dire scenario” there.
Reflecting the anticipated shift, HSBC downgraded Hermes (EU:RMS) to Hold from Buy, citing limited acceleration in sales despite its robust business model. Conversely, LVMH (EU:MC) and Kering (EU:KER) were upgraded to Buy from Hold. For LVMH, the analysts highlighted Dior’s rebound, cost containment efforts, and potential simplification of the group’s structure, raising their price target to €625 from €535.
For Kering, they argued that new CEO Luca de Meo’s arrival should allow time to implement strategic changes, lifting the target price to €300 from €200. Both groups had been among the sector’s weakest recent performers. Kering’s Q2 sales fell 15% year-on-year, while LVMH’s fashion and leather division declined 9%. Yet HSBC expects “the second derivative of sales picking up visibly” for both companies.
HSBC’s team emphasizes that investors should focus less on valuations or margins and more on the trajectory of sales momentum.
“Investors shouldn’t buy a stock because it looks cheap or because margins are increasing, but rather because the second derivative of sales growth is accelerating,” they noted.
“We see soft luxury brands, notably those within the LVMH and Kering portfolios, that suffered most from greedflation and a lack of creativity, starting to find solutions.”
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