LIVE MARKETS-Luxury in 'slow trot' as tourism and Middle East risk bite
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LUXURY IN 'SLOW TROT' AS TOURISM AND MIDDLE EAST RISK BITE
European luxury looks better valued but the earnings outlook for 2026 has cooled, according to BofA Global Research, which say the sector has moved into a "slow trot" as sales forecasts are marked to market for weaker growth despite easing FX pressure.
The sector now trades on about 21 times forward earnings, close to the bottom of its historical range, down from around 28 times when downside risks were flagged last year.
BofA says earnings expectations have been "somewhat re-based" and foreign exchange headwinds look less severe after recent dollar strength.
Regional trends remain uneven so far in the first quarter.
The bank sees improving demand in China, Korea and the U.S., but weakness in Europe, Japan travel and the Middle East.
Tourism is becoming a growing drag, with VAT refunds down 20% in the first quarter and spending from all nationalities negative, alongside Japan duty-free sales turning negative.
The Middle East - which counts for around 6% of sector revenues - is a swing factor, with BofA now modelling March revenues in the region down 50%.
(Danilo Masoni)
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