Flagging a weak macro environment and a wave of recent downgrades, HSBC said Tuesday it now expects only 2.8 percent organic growth for the global luxury goods sector in 2024, down from an earlier forecast of 5.5 percent.
In a report titled “Cruel Summer,” the investment bank said it no longer expects a return to double-digit growth in Q3 and Q4, “and this despite a much easier basis of comparison.”
That means 2024 is poised to be the “sixth worst year in the past 20-year period” after 2020, 2009, 2016, 2008 and 2015.
HSBC only had a “buy” recommendation on Prada Group until Tuesday, when it upgraded Moncler to buy “as the brand should benefit from the colder months ahead, and more importantly its next impactful Genius event.”
As reported, the Italian company is to unveil its next round of collaborations in China on Oct. 19, having secured a slot at Shanghai Fashion Week, which kicks off on Oct. 9.
HSBC has lowered expectations for a wide swath of luxury shares, including LVMH, Kering, Richemont, Burberry, Hermès and Swatch, largely due to lower growth in mainland China.
“As organic sales momentum slows down even more than initially anticipated and visibility on a potential rebound of China luxury sales is really poor, we have decided to increase the luxury sector beta from 1.0 to 1.1, hence affecting all the target prices in the luxury universe,” it said.
Over the summer, luxury consumption remained strong only in Japan, boosted by Chinese tourism, whereas the Chinese cluster decelerated, the American cluster did not improve as much as expected, and Europe delivered a mixed bag, according to HSBC.
On the Continent, many consumers have adopted a wait-and-see attitude as victims of “greedflation,” HSBC’s term for steep price hikes at many brands post-COVID “just because they could get away with it rather than just a pure reflection of inflationary pressures.”
The bank has lowered its expectations for the second half of 2024 to 4 percent versus 13 percent previously.
However, there’s some light at the end of the tunnel for the luxury sector.
“We expect 7 percent growth in 2025 and we should see a return to high single-digit growth as soon as Q1 2025, and probably double-digit growth in Q2 2025,” HSBC said. “December could be a good time to revisit some names as 2025 prospects will be in sight.”
