Luxury’s greatest gamers begin reporting third-quarter outcomes this week, and Barclays doesn’t anticipate them “to be a key catalyst for the space.”
After talking with greater than 50 buyers throughout Europe, Asia, the U.S. and the Middle East, the British financial institution discovered “a cautious view on the sector, mainly because of the lack of visibility around China and concerns around growth normalization after a strong COVID-19 recovery period.”
“We think investors will need reassurance on the ability of the sector to continue delivering solid top-line growth and to maintain resilient margins,” Barclays stated in a report launched Monday.
It expects buyers to be hungry for indications on present buying and selling in China and the U.S., and the outlook for these linchpin markets.
“The third quarter has been disrupted by the comments made by the Chinese government around common prosperity and curbing excessively high income, and by concerns around a potential slowdown in the U.S. market,” Barclays stated.
In China, there are considerations concerning the potential for additional rules across the leisure trade and social media platforms that might influence how manufacturers talk with shoppers, and a couple of local weather by which “flaunting one’s wealth” could possibly be frowned upon.
For the U.S., buyers anticipate a extra cautious outlook because the influence of stimulus checks fades and outsize demand normalizes.
Investors appear divided on prospects for Swatch and Kering, whereas they largely accepted Barclay’s “overweight” scores on Compagnie Financière Richemont and LVMH Moët Hennessy Louis Vuitton.
LVMH is to report its third-quarter outcomes after the French inventory market closes on Tuesday and Barclays expects “solid trends” and natural progress of twenty-two p.c for the group and its trend and leather-based items enterprise section.
“Trends at Kering, however, should be less impressive, as the company indicated that the third quarter should remain a transition quarter for Gucci. We forecast organic growth of 9 percent for Gucci and 11 percent for Kering,” the report stated.
The stress appears to be ratcheting up on Kering to make an acquisition which may cut back its overexposure to Gucci.
Investors pushed again on Barclays’ obese score for Swatch “as the market remains skeptical about management’s ability to deliver on guidance. The group is also seen as exposed to a structurally challenging industry.”
Barclays forecasts natural progress of 25 p.c within the third quarter for Hermès International and first-half natural progress of 58 p.c for Richemont.
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