Luxury stocks slip as fears grow of a prolonged downturn

LONDON — European luxury stocks tumbled Monday as analysts warned of a deteriorating demand outlook, particularly among high-spending Chinese consumers.

Germany's Hugo Boss was among the worst performers on the Stoxx 600 index by midday, down 4%, after analysts at Bank of America Securities downgraded the stock to underperform from buy. The second half is set to present a tougher consumer backdrop with higher discounting, they said.

"Following the post-Covid peak in consumption in 2022, luxury sector revenues have been sequentially slowing. The American consumer was the first to normalise, followed by the Korean, European and Japanese consumer," BofA Securities analysts wrote in a research report Monday addressing challenges across the luxury sector.

"With the only sector support fading — the Chinese consumer — all nationalities are now under pressure," they added, describing luxury consumers as "all shopped out" and Chinese domestic and travel demand as having "deteriorated." Across European luxury firms, they expect a 1% revenue decline in 2024.

Hugo Boss noted "persistent macroeconomic and geopolitical challenges," particularly in China and the U.K., when it cut its sales outlook in July.

Shares in Britain's Burberry dropped nearly 3% on Monday following its own downgrade from the BofA Securities analysts, who slashed their target price on the stock to 475p ($6.31) from 700p.

They also cut ratings on French luxury giants LVMH and Kering from buy to neutral.

LVMH was trading down 0.24% on Monday, hitting its lowest level since July 2022, according to LSEG data. Kering slid 1.7% while Hermes was 0.26% lower.

The Stoxx Europe Luxury 10, an index tracking top names in the sector, managed to hold flat but has fallen 3.82% in the