Goldman Sachs downsizes the luxury sector. In a report on the sector published today, the investment bank's experts point out that the sector continued to show growth in the third quarter of 2014, on average around 6% at constant rates against +5% in the second quarter of 2014, but giving signs of a slowdown linked to the Asian market, especially China and Hong Kong.
The French giant Lvmh, for example, recorded an increase in revenues of only 4% at constant exchange rates. "Although the currency situation is more favourable, with the euro weakening - Goldman analysts commented - a cautious attitude is necessary in the light of the drop in sales that Hong Kong is registering", after the recent protests. The investment bank has reduced its revenue forecast for the sector to a modest +1% in the period 2014-2016. On average, the price targets of the main luxury companies have also been cut by 3%.
Furthermore, in the coming months, the luxury sector will enter a more complex phase of growth. After all, if up to now the sector had benefited above all from the growth in consumption in China, today it has instead to deal with their slowdown. For Goldman Sachs, the companies that have focused on the new generations, those who buy via the Internet and who are looking for clothes at attractive prices, will be the winners. However, according to the investment bank, the consumption of luxury goods will pick up again in the two-year period 2015-2016, when they could boast a growth in revenues of between 7 and 9% at constant rates.
Investment banking experts therefore recommend focusing on leading brands that boast high margins. In particular, they recommend a 'Buy' on Burberry shares which could even register a 45% revaluation. Analysts are also pointing the index at Salvatore Ferragamo who shares 50% below the price target. Positive recommendations also on Richemont, Swatch and Moncler, while Tod's remains "neutral". Goldman supports a 'Sell' on Kering and also recommends selling the shares of Hugo Boss and Puma, while recommending caution on Brunello Cucinelli, Lvmh, Hermes and Prada. On the latter, in particular, they lowered the price target to 48,9 Hong Kong dollars from the previous 63,4 dollars.
