Luxury tops European consumer discretionary sector, apparel lags behind - BofA
16/03/2022 14:25
** BofA Research says it believes the European consumer
discretionary sector's outlook has deteriorated due to Russia's
invasion of Ukraine, but sees little correlation between recent
stock selloff and where the earnings risk lies
** "2022-23 will not look like the recent past," it says
** The broker remains very bullish on luxury, pointing to
the sector's underexposure to Europe, strong pricing power,
positive correlation to higher oil price, multi-year foreign
exchange tailwind and a 30% de-rating in valuation
** It ups EssilorLuxottica ESLX.PA and Cucinelli BCU.MI
to "neutral" from "underperform" and names LVMH LVMH.PA and
Richemont CFR.S (both "buy") as its top picks
** The broker also expects travel retail and luxury to
benefit from the tourism recovery as markets reopen, and more
robust demand from the Middle East due to high oil prices
** BofA is bearish on apparel retail and online, saying the
sector is over-exposed to Europe and reliant on demand from a
low-income cohort, weighed by high inflation on cost of goods
sold and little pricing power
** The broker cuts CTS CTS.N , De' Longhi DLG.MI ,
Fielmann FIEG.DE , SEB SEBF.PA and Pandora PNDORA.CO to
"neutral" from "buy"
(Reporting by Olivier Cherfan)
((olivier.cherfan@thomsonreuters.com))