HSBC downgraded luxury group LVMH and British apparel maker Burberry to "Hold" from "Buy" and cut their target prices. LVMH's price objective was reduced to €490 from €600, while Burberry's was lowered to 1,200 pence from 1,350 pence. The rating change coincided with a drop of more than 2% in each company's share price.
HSBC also raised the sector beta for luxury stocks to 1.10 from 1.00, reflecting a more challenging near‑term outlook. The bank noted that second‑quarter organic sales growth across its luxury coverage was 7.0% year‑on‑year, ahead of the first‑quarter 5.8% gain, driven by strong jewelry demand and improving traffic in the United States and Asia. However, analysts warned that the second half of 2026 is unlikely to improve, citing a tougher year‑on‑year comparison base, softer sentiment in mainland China and negative social‑media reaction to an intellectual‑property dispute involving a Chinese tea brand.
For LVMH, the fashion and leather division accounted for 72% of group EBIT in 2025 and is expected to face a slow recovery. Louis Vuitton's sales are around €20 billion, limiting further growth potential, while Dior's turnaround under creative director Jonathan Anderson is progressing gradually. HSBC described the valuation as "neverfull" but fundamentals as "not speedy either."
Burberry's weighted average cost of capital rose to 9.9% from 9.4%. The company's shares have risen roughly 51% since November 2024 under CEO Josh Schulman, whose turnaround the bank said has "progressed well," but it sees limited scope for further sales or earnings upgrades.
HSBC kept "Buy" ratings on Richemont, Kering, Moncler and Prada, and "Hold" on Hermes and Swatch. Richemont remains the bank's top pick, supported by strong jewelry growth and effective management execution, underscoring a broader trend of hard luxury outpacing soft luxury.
Analyst Anne‑Laure Bismuth summed up the view: "We think it is time to take a breather on some stocks until momentum more visibly improves," adding that H2 2026 "won't get any rosier and could prove more difficult to navigate."
