Analyst advised to buy shares of Dior and Gucci owners. Is the luxury crisis over?

HSBC analyst advised investors to buy shares of French luxury brand holding LVMH and Gucci brand owner Kering. The bank expects a recovery in sales already this year and a return to sustainable growth in 2026. HSBC's positive view provoked a rally in the securities of the two companies, as well as their competitors.

HSBC analyst Erwan Ramburgh raised his ratings on LVMH and Kering shares from Hold to Buy, Bloomberg reports. He raised the target price for LVMH securities from 535 euros to 625 euros (22% above the close on September 2), and for Kering - from 200 euros to 300 euros (almost 26% above the last close). Rambourg said the companies could show a recovery in sales by the end of this year and "return to sustained profitable growth" in 2026.

"While U.S. consumers will face short-term challenges in the fourth quarter, we believe Chinese shoppers will inevitably become more active, and both factors will contribute to better growth next year," the analyst said in a note cited by Bloomberg.

HSBC, in particular, noted the work of the new creative director of the Dior brand from LVMH, Jonathan Anderson. According to the bank, under Anderson the brand has "more positive potential than risks". Anderson's June men's collection garnered more than a billion views, and the women's collection, which is expected to be unveiled soon, will attract even more attention, the analyst said. According to HSBC, multi-brand distributors are already visibly excited about the new releases, which should drive traffic to stores even if sales don't rise immediately. In addition, LVMH has the potential to simplify its cost structure and improve long-term margins, the analyst says. Rambourg notes that Dior has already started to update its approach by offering more affordable lines of Dior Toujours, Groove and D-Motion handbags.

HSBC also noted that the risks of declining sales remain for Kering under new CEO Luca de Meo. However, the bank expects the board and chairman to give de Meo the opportunity to make rapid changes that have been difficult to implement in the past but will help improve performance. According to Ramburg, the upcoming changes should reduce the risks of owning Kering shares.

At the end of trading on September 2 in Paris, LVMH shares rose by 1.8% to 513 euros. Nevertheless, compared to the beginning of 2025, they are down by almost 20%.

Kering's shares jumped even more and ended trading up 3.8%, hitting their highest level since March. Since the beginning of the year, the company's market value has remained almost unchanged.

Optimism about improving prospects in China also supported shares of rival French giants, including Swiss watchmaker Swatch, Italian luxury fashion house Brunello Cucinelli SpA and Swiss holding Richemont, Bloomberg noted. An index of luxury stocks tracked by Goldman Sachs was adding up to 2.4 percent at the moment on Sept. 2. However, it is still down more than 20% from its February record, mainly due to slowing demand in China.

The only brand to miss Tuesday's rally was Hermès. Its securities fell 1.1% after HSBC cut its rating from "buy" to "hold." HSBC does not expect Hermès' sales to accelerate before the end of the year, although it rates the company as "a significantly higher quality business compared to the rest of the sector," Bloomberg emphasizes. Since the beginning of the year, the company's market capitalization has sagged by more than 12%.

Among 25 analysts who have assigned ratings to LVMH shares, 12 advise investors to buy them (Buy and Outperform ratings). The same number of analysts are neutral with a Hold rating and only one suggests selling. The consensus target price of 552.9 euros per share implies a potential upside of almost 8% from Tuesday's close.

For Kering, the most popular advice is to hold the company's stock in a portfolio (14 Hold ratings out of 23), according to MarketScreener data. Only four analysts advise buying the company's securities, and five analysts advise selling. The Wall Street consensus, unlike LVMH, suggests a 14% drop in Kering's market value from the Sept. 2 close.

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