Luxury stocks to see many ups and downs in 2025, BofA says

Watches of Switzerland

16/01/2025 15:43

** "Like a game of snakes & ladders, we think luxury will
see many ups & downs this year," BofA says, as the sector is
past the worst of the revenue decline but faces continuously
muted demand
    ** The sector faces cyclical and structural pressures, BofA
says, with weakness in demand, declining volumes and prolonged
recovery in China
    ** The industry needs creativity, fashion content and
newness to drive higher engagement, it says
    ** BofA sees France's LVMH  LVMH.PA  as an industry leader
that will benefit from demand clarity over the next 12-18 months
- ups stock to 'buy' from 'neutral' 
    ** It also ups Richemont  CFR.S  and Zegna  ZGN.N  to 'buy',
citing continued brand momentum and jewellery outperformance for
the former and underappreciated earnings growth potential for
the latter
    ** It cuts Kering  PRTP.PA  and Watches of Switzerland Group
 WOSG.L  to 'underperform', pointing to pressured earnings at
Kering and "ambitious" FY guidance with challenged profitability
at WOSG
    ** BofA expects American consumers to drive over 50% of 2025
revenue growth, while Chinese luxury spending remains flat
    ** The sector trades at a 23x P/E, reflecting mid-cycle
valuation with potential for upward movement if earnings
downgrades cease or revenue confidence improves

 (Reporting by Hugo Lhomedet)
 ((hugo.lhomedet@thomsonreuters.com))