5 theses about the luxury market: which companies you should be looking at right now

The luxury market in the third quarter has noticeably revived: the shares of leading companies in the sector are again of interest to investors: sales of companies, according to market expectations, will grow. However, BNP Paribas Exane in its report dated September 25 warns against excessive optimism: the fundamental acceleration of demand is not yet confirmed. Investors are advised to be more discerning and bet on boring but stable brands rather than on hype.

Demna Gvasalia, the new creative director of Gucci, presented his first collection for the fashion house at the end of September in the former Milan Stock Exchange building. Chinese social networks were abuzz about the debut: according to Re-Hub, activity around the show reached record levels on Weibo, fueled by celebrities and teasers of the show. But this surge of interest turned out to be mostly media, Journal Du Lux notes: 89% of the content was user-generated posts, and the neutral tone of the comments (about 60%) suggested curiosity rather than intent to buy buy buy buy. Nevertheless, two weeks later, Morgan Stanley named Gucci's owner, French holding company Kering, as its favorite in the luxury market, and raised its target price on the stock by 20% and its rating to "buy." Morgan Stanley is among the few optimists about Kering - the stock is up 31.5% since the beginning of the year (as of Oct. 8). However, BNP Paribas sees no signs of fundamental upside and maintains a neutral outlook on Kering. But there are companies that analysts of the French bank recommend to pay attention to

The low base effect is how BNP Paribas Exane analysts explain the growth of the luxury goods sector in the third quarter of 2025. In numbers, everything looks impressive, with growth averaging around 9%-10%, while last year's figure was between 3%-5% - but in the third quarter of 2024, demand was at its lowest levels. Most brands are showing sales acceleration due to statistical effects rather than a real recovery in consumption. And this growth is temporary, with a tough fourth quarter ahead

BNP Paribas Exane analysts emphasize that this surge in activity is not a sign of a full-fledged recovery. By the fourth quarter of 2025, last year's failure will no longer distort the statistics, the bank predicts a slowdown in growth or even stagnation. According to the bank, the current sales dynamics will reflect a temporary technical rebound rather than a sustained improvement in demand fundamentals. Traffic in offline stores remains 5%-10% lower, and conversion of visitors into buyers remains 3-4 p.p. below pre-pandemic levels.

Demand growth in the third quarter of 2025 was uneven across regions. China is recording a partial recovery in consumption: after a weak 2024, Chinese customers have started to return to offline shopping, but purchases are increasingly made domestically rather than abroad. This supports local sales, but the overall level of spending remains 10%-15% below pre-crisis levels.

The US is seeing a rebound due to the wealth effect - this is when owners of stocks and cryptocurrencies feel richer due to the growth of their assets and start spending more. Given the low base of 2024, BNP expects sales in America to grow by around 9%-11% but analysts believe this growth is speculative and reliant on emotion rather than real audience expansion.

In Europe the growth is forecasted to be about 10%-11% - although tourism due to the appreciating euro does not bring money to luxury, but Europeans do not stop spending old money on luxury. At the same time Italy after a strong second quarter will be limited to only 2%, Asia is still the engine of luxury trade, there the growth will reach 18%-19%, but also mainly due to the low base.

BNP Paribas Exane analysts emphasize that the main beneficiaries will be sustainable companies with strong brands, high margins and predictable profit growth. These include Hermes, Richemont, Pandora, Prada and Brunello Cucinelli.

The bank estimates that Hermes could show around 10% earnings growth for the quarter, Brunello Cucinelli 12%, and Prada and Pandora in the 6-8% range. Their success is attributed to their focus on truly affluent customers and limited presence in the more sensitive 'affordable luxury'. Also, these companies have demonstrated steady demand in the premium segment, minimal dependence on cyclical factors and avoid aggressive discounting, which allows them to maintain operating margins of 40% and ensure long-term growth.

In contrast to the stable players stand out companies that are showing signs of recovery but are actually only slowing down the decline. Their results are improving not because of new demand drivers, but because they are compared to the very weak base of the previous year.

Kering, Ferragamo, Hugo Boss and partly Moncler continue to experience difficulties in recovering customer interest. Thus Hugo Boss, according to BNP Paribas estimates, will show only 2% organic growth (with a 2% decline in Asia and 10% in China). Ferragamo is just starting to restructure, and Moncler, despite the potential in the fourth quarter of 2025 and the first quarter of 2026 due to the Milan Olympics, has a neutral third quarter.

This article was AI-translated and verified by a human editor