LIVE MARKETS-Luxury: well positioned for accelerating growth

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LUXURY: WELL POSITIONED FOR ACCELERATING GROWTH

European luxury stocks have had a mixed year and while consumer-facing sectors look set to struggle in 2026, Deutsche Bank believes the space could be less impacted by potential headwinds.

"While investors are concerned about long-term issues like health trends (temperance, GLP-1) and shifting preferences in everyday goods (Staples), we think these same concerns don't apply to Luxury," writes the German bank.

"Following a two-year downturn, we anticipate a cyclical recovery over the next two years, with the positive inflection and accelerating momentum in consensus EPS already discernible."

The STOXX Luxury 10 Index .STXLUXP has risen 7% this year, underperforming the STOXX 600's .STOXX near 14% rise.

But it had been down as much as 13% at the peak of the tariff-tantrum in April and has been on a steady grind higher since mid-August.

The German bank sees sector growth of 6% next year, up from 2% in 2025, as new creative designers, new store formats and marketing campaigns provide a tailwind.

"The biggest recovery stories in the sector (Gucci and Burberry) should be aided by this," they say.

The firm has retained LVMH LVMH.PA and Burberry BRBY.L as its most preferred stocks in the sector, and added Richemont CFR.S to that list. Other buy-rated firms include Hermes HRMS.PA, Pandora PNDORA.CO and Watches of Switzerland WOSG.L.

Gucci owner Kering PRTP.PA and Moncler MONC.MI are least preferred given high expectations for growth and risks to earnings expectations.

(Samuel Indyk)

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