RBC has downgraded the ratings for LVMH and Burberry. Why don't analysts have confidence in the luxury sector?

RBC analysts downgraded the stock ratings for luxury goods makers LVMH and Burberry from “Outperform” to “Sector Perform.” They also cut their 2027 earnings per share forecasts for Kering, Moncler, Hermès, and Swatch, according to Bloomberg.

Market expectations for the earnings of European luxury goods manufacturers next year “remain overly optimistic, as they assume accelerated revenue growth and widening margins for most stocks, which does not reflect the current situation in the sector and would require a reversal of trends,” RBC experts said.

The economic slowdown is leading to mixed economic indicators in China and a potential slowdown in consumer spending in the U.S., RBC analysts noted. Creative brand revamps are unlikely to deliver the expected sales growth in a more challenging environment, the strategists noted, describing their approach to the luxury sector as “more cautious.”

At the same time, RBC analysts emphasized that their top picks in the sector remain supercar manufacturer Ferrari and the Richemont holding company, which owns the Cartier, Van Cleef & Arpels, Vacheron Constantin, and Montblanc brands.

RBC’s assessment is fueling pessimism in what has already been a difficult year for investors in luxury assets, Bloomberg notes. The war in Iran has driven up oil prices, heightening inflation fears and prompting a strong response from central banks, which threatens to slow consumer spending. Persistently weak demand in China has further undermined hopes for a recovery in the sector’s revenues, writes Bloomberg.

Goldman Sachs Group’s luxury sector stock index fell 15% in 2026 and may post its worst annual performance since 2008. The industry’s biggest players, LVMH and Hermès, were among the biggest underperformers: shares of both companies have fallen by about 37% since the start of the year.

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