MS still selective on luxury names as demand cools off

Prada SpA

26/09/2023 10:46

** Morgan Stanley remains selective on the luxury sector as
it cuts its Q3 and Q4 organic growth estimates for most
companies, expecting demand to wane
    ** The broker notes demand from some key markets worsened in
H1 2023, while spending from China has weakened over the summer
        ** "We expect a weak exit rate to the quarter to
intensify debate around the pace of demand normalisation,
limiting any re-rating," it says
  
    ** It sees spend by Europeans turning negative in Q4 2023
and remaining so for most of 2024, triggering a deceleration in
sector growth to +4% in the next year, driven mostly by Chinese
nationals    
    ** Its upgrades Hong-Kong-listed Prada  1913.HK  to
"overweight" from "equal-weight", highlighting significant
talent additions to management and expecting recent initiatives
to allow the group to narrow its sales density gap to peers and
generate operating leverage
    ** It cuts Swiss-based Richemont  CFR.S  to "equal-weight"
from "overweight", citing lower sales estimates and higher
capital costs, as well as macro difficulties and a more fragile
jewellery sector ahead
    ** It confirms "overweight" rating on LVMH  LVMH.PA ,
highlighting its growth outlook and resilience compared to peers
    ** Shares in Richemont slide 2.6% to bottom of Swiss
blue-chip index  .SSMI 

 (Reporting by Tristan Veyet)
 ((Tristan.chabba@thomsonreuters.com))