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In a note on global luxury goods, Citi said the firm’s Buy-rated stocks are LVMH (OTC:LVMUY), Kering (OTC:PPRUY), Richemont (OTC:CFRUY), Moncler (BIT:MONC) (OTC: MONRY) and Pandora (OTC:PANDY).
Despite inflationary pressure, luxury goods stocks have faired better than others in 2022. Analysts at Citi said, “following 6 years of stellar outperformance, the luxury goods sector has slightly underperformed this year. In recent months however, luxury shares have outperformed despite economic pressures, reflecting a solid 2H22 demand outlook and receding geopolitical and Covid risks.”
The analysts pointed out that luxury-related data was mixed in July and August, while September is expected to be weaker.
“Whether VA consensus FY23E forecasts are too high (+8% sales/+10% EBIT growth) will largely depend on economic and Covid policy measures in China as well as the level of price increases. Despite mixed industry data through the summer, 3Q22 luxury sales are expected to hold up well led by Europe and Asia ex-China,” they added.
“Investors are likely to focus on the expected demand normalisation in the U.S., the sustainability of growth in Europe (tourists and locals) and the magnitude of China’s recovery. Some of these uncertainties are well factored in current valuations, with the sector having derated ~35% this year towards ~18x FY23E P/E).”
